author: WILBUR, Circuit Judge.

text:
    DUNCAN v. UNITED STATES.

    No. 6338.
    Circuit Court of Appeals, Ninth Circuit.
    March 9, 1931.

      John A. Jeffrey, of Portland, Or., for appellant.
    George Neuner, U. S. Atty., and J. W. McCulloch, Asst. U. S. Atty., both of Portland, Or.
    Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges.

      Certiorari denied 51 S. Ct. 656, 75 L. Ed. —.

   WILBUR, Circuit Judge.

The appellant was indicted and convicted for a violation of section 29 of the Radio Act of February 23, 1927, 44 Stat. 1172 (47 US CA § 109), and penalty was imposed upon him in pursuance of section 33 of the same act (44 Stat. 1173 [47 USCA § 113]),. As ,the defendant was acquitted on all the counts of the indictment except count 3, it is only necessary to consider the indictment upon .that count.

The appellant was accused in that count of knowingly, unlawfully, willfully, and feloniously uttering obscene, indecent, and profane language by means of radio communication and by interstate radio transmission from his radio broadcasting station known as KYEP situated in Portland, within the state and district of Oregon. It is alleged that this broadcasting extended beyond the limits of the state of Oregon and reached other states within the United States. The language alleged to have been used is set up in luce verba in the indictment and occupies over six pages of the transcript. Although the main question in the case, in our view, is as to whether or not this language was obscene or indecent or profane, we think that the question may be disposed of without setting out the highly objectionable language set forth in the indictment. It is undesirable to set forth this language if it can.be avoided because of the fact that it charges various crimes against individuals specified which should not be embodied in the published reports.

Preliminarily we must- dispose of two points which are urged by the appellant. The appellant’s first point is that the act of Congress does not purport to provide a penalty for the use of obscene, indecent, or profane language in a broadcast. Section 29 of the Radio Act provides as follows: “Nothing in this chapter shall be understood or construed to give the licensing authority the power of censorship over the radio communications or signals transmitted by any radio station, and no regulation or condition shall be promulgated or fixed by the licensing authority which shall interfere with the right of free speech by means of radio communications. No person within the jurisdiction of the United States shall utter any obscene, indecent, or profane language by means of radio communication.”

Section 33 of the same act provides: “Any person, firm, company, or corporation who shall violate any provision of this chapter, * * * upon conviction thereof in any court of competent jurisdiction shall be punished by a fine of not more than $5,000 or by imprisonment for a term of not more than five years or both for each and every such offense.” .

In view of the fact that the statute expressly prohibits the use of such language in radio broadcasting and expressly imposes a penalty for violation, of the law, we see no ground for appellant’s contention made for the first time upon the argument. The statute plainly imposes a punishment for broadcasting obseene, indecent, and profane language.

Appellant’s next proposition is that Congress has no power to impose a penalty for the use of such language in broadcasting. It is conceded by the appellant, as it must be, that the conveyance of ideas across the boundaries of the state of origin to other states in the United States is interstate commerce and is analogous to the transmission of such ideas by telephone or telegraph. This, we think, is too plain under well-established principles to require citation of authorities, particularly in view of the concession of the appellant. However, in this connection we call attention to the following decisions without further comment: Pensacola T. Co. v. W. U., 96 U. S. 1, 24 L. Ed. 708; Western Union Teleg. Co. v. Pendleton, 122 U. S. 347, 7 S. Ct. 1126, 30 L. Ed. 1187; International Text-Book Co. v. Pigg, 217 U. S. 91, 30 S. Ct. 481, 54 L. Ed. 678, 27 L. R. A. (N. S.) 493, 18 Ann. Cas. 1103; Railroad Commission of State of Wisconsin v. C., B. & Q., 257 U. S. 563, 42 S. Ct. 232, 66 L. Ed. 371, 22 A. L. R. 1086; Whitehurst v. Grimes (D. C.) 21 F.(2d) 787; U. S. v. American B. & M. Co. (D. C.) 31 F.(2d) 448, 452; Gen. Elec. Co. v. Fed. Radio Comm., 58 App. D. C. 386, 31 F.(2d) 630; Technical Laboratory v. Fed. Radio Comm., 36 F.(2d) 111, 112, 66 A. L. R. 1355; City of N. Y. v. Fed. Radio Comm. (App. D. C.) 36 F.(2d) 115. The appellant does not dispute the right of Congress to regulate interstate communication by radio, but his claim is that the prohibition of the use of obseene language over the radio in such interstate commerce is not a regulation of that commerce; that the remedy for such evils is an appeal to the law of the state in which the broadcasting station is situated; that the use of such language is one properly punishable under the police power of the state, and that under the Tenth Amendment to the Constitution of the United States such powers are reserved to the State from the United States. In support of this proposition appellant cites Linder v. U. S., 268 U. S. 5, 45 S. Ct. 446, 69 L. Ed. 819, 39 A. L. R. 229; Daly v. Elton, 195 U. S. 242, 25 S. Ct. 22, 49 L. Ed. 177; U. S. v. De Witt, 9 Wall. 41, 19 L. Ed. 593; U. S. v. Reese, 92 U. S. 214, 23 L. Ed. 563; Barbier v. Connolly, 113 U. S. 27, 5 S. Ct. 357, 28 L. Ed. 923; Des Moines v. Oil Co., 193 Iowa, 1096, 184 N. W. 823, 188 N. W. 921, 23 A. L. R. 1322; Gibbons v. Ogden, 9. Wheat. 1, 6 L. Ed. 23; Mugler v. Kansas, 123 U. S. 623, 8 S. Ct. 273, 31 L. Ed. 205; Coppage v. Kansas, 236 U. S. 1, 35 S. Ct. 240, 59 L. Ed. 441, L. R. A. 1915C, 960.

The faet that in regulating interstate commerce Congress may exercise police power, which in the absence of delegation of power to the federal government would be exclusively within the police power of the state, is not determinative of the question. The determinative point is whether or not the Constitution does delegate to the United States police power which in the absence of such delegation could only be exercised by the states. It has uniformly been held that the delegation of power to Congress to establish post offices and-post roads (Const. art. 1, § 8, cl. 7) authorized Congress to exclude objectionable matter from United States mail. In a discussion of this question the Supreme Court considered the extent of this grant to the Congress of the United States in Re Jackson, 96 U. S. 727, 736, 24 L. Ed. 877. In the opinion upholding the. power of Congress, written by Mr. Justice Field, it is said:

“In excluding various articles from the mail, the object of Congress has not been to interfere with the freedom of the press, or with any other rights of the people; but to refuse its facilities for the distribution of matter deemed injurious to the public morals. Thus, by the Act of March 3, 1873 [17 Stat. 599, § 2], Congress declared 'that no obseene, lewd, or lascivious book, pamphlet, picture, paper, print, or other publication of an indecent character, or any article or thing designed or intended for the prevention of conception or procuring of abortion, nor any article or thing intended or adapted for any indecent or immoral use or nature, nor any written or printed card, circular, book, pamphlet, advertisement, or notice of any kind, giving information, directly or indirectly, where, or how, or of whom,-or by what means, either of the things before mentioned may be obtained or made, nor any letter upon the envelope of which, or postal-card upon which indecent or scurrilous epithets may be written or printed, shall be carried in the mail; and any person who shall knowingly deposit, or cause to be deposited, for mailing or delivery, any of the hereinbefore mentioned articles or things, * * * shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall, for every offence, be fined not less than $100, nor more than $5,000, or imprisonment .at hard labor not less than one year nor more than ten years, or both, in the discretion of the judge.’
“All that Congress meant by this act was, that the mail should not be used to transport such corrupting publications and articles, and that any one who attempted to use it for that purpose should be punished. The same inhibition has been extended to circulars concerning lotteries, — institutions which are supposed to have a demoralizing influence upon the people.”

Later this matter was again considered by the Supreme Court in Re Rapier, 143 U. S. 110, 12 S. Ct. 374, 36 L. Ed. 93, and the power of Congress to exclude lottery matter from the mails was upheld.

The force of these decisions is recognized by the appellant, but he attempts to avoid these authorities by the suggestion that power over the Postoffiee Department of the government is greater than the power to regulate interstate commerce in the respects involved in this matter (see Const. art. 1, § 8, cl. 3). It may be conceded that by reason of the fact that Congress has developed a policy of government operation of the mails that the question as to the transportation of obscene matter in the mails is not identical with that involved in the transmission of obscene matter in interstate commerce. We can see no distinction in principle.

The power of Congress under the constitutional grant to regulate commerce between the states has been considered in connection with the so-called White Slave Traffic Act, or Mann Act (36 Stat. 825, e. 395 [18 USCA § 397 et seq.]), prohibiting the transportation of women and girls for immoral purposes in interstate and foreign commerce. This law was sustained by the Supreme Court in Hoke v. U. S., 227 U. S. 308, 33 S. Ct. 281, 283, 57 L. Ed. 523, 43 L. RR. A. (N. S.) 906, Ann. Cas. 1913E, 905, and in sustaining this law Judge McKenna, speaking for the court, likened the prohibition to that “which prohibits the carrying of obscene literature and articles designed for indecent and immoral use from one state to another. Act of February 8, 1897, 29 Stat. at L. 512, c. 172. U. S. v. Popper [D. C.] 98 F. 423.” The case of United States v. Popper thus referred to by the Supreme Court with approval was decided by Judge De Haven in the District Court for the Northern District of California and amply sustains the power of the federal government involved in the case at bar. See, also, Wilson v. U. S., 232 U. S. 563, 34 S. Ct. 347, 58 L. Ed. 728. In Hammer v. Dagenhart, 247 U. S. 251, 38 S. Ct. 529, 531, 62 L. Ed. 1101, 3 A. L. E. 649, Ann. Cas. 1918E, 724, involving the constitutionality of the Act of Congress of September 1, 1916 (39 Stat. 675), prohibiting transportation of goods manufactured by child labor under certain conditions, the law was held unconstitutional, but the difference between the question involved in that ease and that involved in transportation of impure foods and drugs, lottery tickets, and obscene literature was thus distinguished: “In each of these instances the use of interstate transportation was necessary to the accomplishment of harmful results. In other words, although the power over interstate transportation was to regulate, that could only be accomplished by prohibiting the use of the facilities of interstate commerce to effect the evil intended.”

In Clark v. U. S. (C. C. A.) 211 F. 916, section 245 of the Federal Criminal Code (Act of March 4,1909, c. 321, 35 Stat. 1138, U. S. Comp. St. Supp. 1911, p. 1664 [18 US CA § 396]) was sustained as a constitutional exercise of the power of Congress to regulate interstate commerce. This section of the Criminal Code dealt with the transportation of obscene, lewd, and lascivious literature or other matter of indecent character, and is direct authority upon the right of Congress to prohibit such transportation. It thus appears that the right of Congress to'enact such legislation has been thoroughly settled. See Coomer v. U. S. (C. C. A.) 213 F. 1.

In the trial court the appellant appropriately challenged the sufficiency of the indictment, and we have now to consider whether or not the language set forth in the indictment comes under the ban of section 29 of the Eadio Act above quoted. Appellant maintains that the language set forth in the indictment as having been used by the defendant in radio broadcasting was neither obscene nor indecent within the meaning of the law. The district attorney, on the other hand, contends that the language is both obscene and indecent. Neither side have discussed the question as to whether or not the language set forth in the indictment was profane within the meaning of the law. Upon this subject the appellant contents himself with the following claim, as stated in his brief: “Language is not obscene, indecent or profane within the legal meaning of those terms, except it is calculated to promote violation of the law and the general corruption of morals. It is determined by the sensibilities and moral standards of a people, as evolved from generation to generation. It changes with the times and civilization.”

And, on the other hand, the district attorney asserts in the argument that the taking of the name of the Diety in vain is profane within the meaning of the law. We are satisfied from an examination of the indictment that, while the language used by the appellant is vulgar, scurrilous, and indecent in the popular sense of the term, it is not obscene or indecent within the meaning of those terms as universally applied in the administration of the criminal law with reference to the use of obscene and indecent language. An elaborate discussion of that question we think entirely unnecessary because there is no serious disagreement in the authorities nor between the parties as to the law upon the subject. The test is as to whether or not the language alleged to be obscene would arouse lewd or lascivious thought in the minds of those hearing or reading the publication. As stated by Judge Baker of the United States District Court of Indiana in U. S. v. Males, 51 F. 41, 43: “It seems to me that the statute under consideration was intended to prohibit the dissemination by the mails of printed or written matter or pictorial productions calculated to excite the animal passions, and to corrupt and debauch the mind, and not such as are merely coarse, vulgar, or indecent in the popular sense of those terms.” In that case he held that the language used, although coarse, vulgar, and indecent, was not within the purview of the statute because its tendency was to excite anger and condemn and repel rather than excite feelings of an impure, lascivious, or unchaste character. See, also, U. S. v. Clark (D. C.) 43 F. 574; Griffin v. U. S. (C. C. A.) 248 F. 6; Knowles v. U. S. (C. C. A.) 170 F. 409; Dysart v. U. S. (C. C. A.) 4 F.(2d) 765; Krause v. U. S. (C. C. A.) 29 F.(2d) 248. And our own more recent decision in Magon v. U. S., 248 F. 201, 203, where it was said: “In construing the word ‘obscene,’ as used therein, it has been uniformly held that, if the matter complained of were of such a nature as would tend to corrupt the morals of those whose minds are open to such influences by arousing or implanting in such minds lewd or lascivious thoughts or desires, it is within the prohibition of the statute, and that whether or not it had such tendency was a question for the jury.” (Citing numerous cases to which we refer.)

In U. S. v. Davidson, 244 F. 523, 529, the District Court of the Northern District of New York had under consideration a letter charging the addressee with certain immoral conduct. It is said of this letter: “The communication in the instant case is vulgar, abusive, insulting, and one calculated to arouse angry passions and resentment, but not sexual passions or desires.” It was held that the letter was not indecent within the meaning of the law. ,

The statements in the indictment, so far as they are involved in the charges of obscenity and indecency, may be summarized as follows : They charge an individual named as a “grafting thief,” a man who would corrupt school teachers by asking them to write letters to the Radio Commission; charging this same individual as being “slick, thieving, grafting, dirty, cowardly,” “a grafting scoundrel,” a “grafting thief,” a “wall-eyed scoundrel,” charging the same individual with hiding a “yellow vulture mixed up in the Bizzell case.” Again the same individual was characterized as a “doggoned thieving, lying, plundering, doggoned corrupt crook, that goes out here and rams a Carnation Milk contract through the schools, and has the little children of this town a’drinking putrid milk.” “Doggone his lousy picture. He’s not fit for the penitentiary. He’d disgrace any penitentiary.” He refers to another individual as a “sewer rat” and returning to the first individual he thus characterizes him, “He is the lowest of the low, the vilest of the vile, the dirtiest thievin’ grafter that ever disgraced the school board in any country.” He also calls him a “doggoned old slick witted coward,” and a “yellow coward.” He denounces certain newspapers in unmeasured terms. He accuses them of receiving money to withhold publication of news with reference to an attempted rape, and of withholding news of a sihallpox epidemic. He refers to another individual as the “lowest dirtiest vilest grave robber on the Pacific Coast,” and to a number as a “bunch of infamous, despicable thieves and receivers of stolen goods.” He states that the newspapers look on in silence while a certain individual “looted the school funds and prostituted the school teachers of this district.” The same newspaper is charged with protecting “Sodomites and concealing murder, arson and burglary and waxing rich from the wages of thieves.”

It is manifest from the foregoing that the language used, while extremely abusive and objectionable, has no tendency to excite libidinous thoughts on the part of the hearers. If the appellant had been engaged in a crusade to clean up the city and in furtherance of that crusade had confined himself to truthful statements concerning the wrongdoing of public officials, it would hardly be claimed that this rough, abusive, vulgar, and unseemly language was obscene according to the test applied in criminal law. The f aet that the appellant’s attack upon public officials grew out of a desire on his part to further the interests of the independent grocery stores does not change the character or effect of the language, and it is conceded that in the case at bar the question of whether or not the statements made by the appellant were true is immaterial. We do not wish to be understood as approving in any degree the language used by the appellant. The question for our consideration is whether Congress has prohibited the use of such language over the radio. We must conclude that the language used is not covered by the statutory prohibition against the use of obscene and indecent language. We will now consider whether or not the language is profane.

In that connection we will examine the following statements: “You’re the infernal gang that put in and turned the dairy industry over to that damn scoundrel. * * * ” (We omit the name.) “You’re a fine example, by God, for the children of this school district.” “He will do anything, there’s nothing in God Almighty’s world that * * * wouldn’t do.” And, “Wait until I get through some of the trouble you’re getting an ex-eonviet to make for me and I’ll put on the mantle of the Lord and call down the curse of God on you, that’s what I’ll do. You infamous harlot, you arch criminal, the people should tar apd feather you and yours,” etc.

The question of what constitutes profane language has been before the courts for centuries. The subject is usually dealt with as a branch of the common-law offense of blasphemy, but in the United States particularly it has been a frequent subject of legislation. In the Century Dictionary, “profane” is defined as follows: “Irreverent toward God qr holy things; speaking or spoken, acting or acted, in manifest or implied contempt of sacred things; blasphemous: as, profane language; profane swearing.” In Gaines v. State, 7 Lea (75 Tenn.) 410, 40 Am. Rep. 64, decided in 1881, the defendant was charged with uttering a profane oath in a public place, etc. It was said: “Any words importing an imprecation of divine vengeance or implying divine condemnation, so used as to constitute a public nuisance, would suffice. Isom v. State, September Term, 1880; Holcomb v. Cornish, 8 Conn. 375.”

In Sanford v. State, 91 Miss. 158, 44 So. 801, in dealing with the following language, “Go to hell, you low down devils,” the court said: “The language does not violate the statute, since, upon strict construction, which is required of the courts, it lacks any ‘imprecation of divine vengeance’ and does not ‘imply divine condemnation. State v. Wiley, 76 Miss. 282, 24 So. 194, 71 Am. St. Rep. 531. There was simply a rude request or order to go to hell, with no necessity to obey, no power to enforce obedience,, and no intimation that the irresistible Power had condemned, or was invoked to condemn, them to go to hell.”

In a more recent ease, City of Georgetown v. Scurry, 90 S. C. 346, 73 S. E. 353, 354, the court said: “It is true that profane language is language irreverent toward God or holy things.”

In the ease of Roberts v. State, 120 Ga. 177, 47 S. E. 511, the Supreme Court of Georgia in May, 1904, seemed to be of the opinion that the words, “I can whip any damn Groover of the name,” was profane language, but remanded the ease for a new trial because of erroneous instructions with relation to other language contained in the indictment.

In Holcomb v. Cornish, 8 Conn. 375, decided by the Supreme Court of Connecticut in 1831, defendant was found guilty of the use of profanity in referring to another as a “damned old rascal,” and also using the name of the Deity in that connection. The court, speaking through Williams, Justice, in answering the contention that the language used did not constitute profane cursing and swearing, said: “Some of these words, I have no doubt, are clearly within the statute. They are imprecations of future divine vengeance upon the magistrate. Others may be of more doubtful import. It will hardly be denied that they are profane. * * * ”

The Supreme Court of Mississippi in Orf v. State, decided in June, 1927,147 Miss. 160, 113 So. 202, said: “We think the language ‘Well, the damn thing is done broke up’ (referring to the Sunday school being held in the church), implied Divine condemnation, and was ‘so used as to constitute a .nuisance.’ ”

In reaching that conclusion the court quoted the definition of “damn” given in Webster’s Dictionary, as follows: “To invoke condemnation; to curse; to swear; to invoke condemnation upon; to condemn to eternal punishment in a future world; to consign to perdition.”

This court also relied on State v. Wiley, 76 Miss. 282, 24 So. 194, 71 Am. St. Rep. 531, supra.

The Supreme Court of Judicature in the state of New Jersey in 1837, in the case of Johnson v. Barclay, 16 N. J. Law, 1, sustained a conviction for profane swearing. It was alleged in that ease that the defendant swore thirty-three profane oaths in the words “By God, etc.” It was held that this was sufficient allegation in an information where such language was alleged to have been used profanely. In answer to the contention that these words might have been used innocently the court stated: “It is a sufficient answer to this, to say, that if the words were so used, by the defendant, or were spoken by him in connection with any other words, in the ordinary course of argument, or conversation, then Barclay, the informant, has committed perjury, for he swears that Johnson uttered profane oaths — Profane oaths and rational conversation, are very different things, and it does not require judicial skill to distinguish the one from the other.”

The Supreme Court of Arkansas in 1894, in the case of Bodenhamer v. State, 60 Ark. 10, 28 S. W. 507, considered the sufficiency of an indictment and instruction in the prosecution for profane swearing and cursing. It was held that the following instruction to the jury was proper, to wit: “The jury are instructed that, before they are authorized to find the defendant guilty, they must believe beyond a reasonable doubt that the defendant did, in Baxter county, and state of Arkansas, within twelve months preceding the indictment, profanely swear or curse. To profanely swear would be to irreverently, disrespectfully, or contemptuously take the name of God in vain.”

Under these decisions, the indictment having alleged that the language is profane, the defendant having referred to an individual as “damned,” having used the expression “By God” irreverently, and having announced his intention to call down the curse of God upon certain individuals, was properly convicted of using profane language within the meaning of that term as used in the act of Congress prohibiting the use of profane language in radio broadcasting.

Appellant further contends that the trial judge committed error in proceeding with the trial of the ease after appellant had filed an affidavit charging prejudice. This matter is not properly presented for our consideration, for the reason that the affidavit and the order striking out the affidavit, although printed in the transcript, are not incorporated in the bill of exceptions and not a proper part of the record. Beach v. U. S. (C. C. A.) 35 F.(2d) 837; Bassing v. Cady, 208 U. S. 386, 28 S. Ct. 392, 52 L. Ed. 540, 13 Ann. Cas. 905; Ingram v. U. S. (C. C. A.) 5 F.(2d) 940. We have examined the affidavit and find that it was filed on the day of trial, and that the affidavit does not set forth any excuse for the failure to present same at the time fixed by law, ten days before the trial, and for that reason was insufficient and was properly stricken from the record. The allegations of the affidavit were also entirely insufficient and amounted to little more than a general allegation that the judge was intimately acquainted with people and newspapers who were supporting chain stores and that appellant was engaged in a campaign against such chain stores. ■ It was therefore alleged upon this basis that the judge was prejudiced against the defendant. These allegations are too general to raise the issue of prejudice, but we base our decision upon the ground that the affidavit was filed too late and is therefore properly stricken from the record.

Judgment affirmed.


source: Caselaw Access Project

license: Public Domain

text:
    BUCK v. McLAUGHLIN.
    No. 6244.
    Circuit Court of Appeals, Ninth Circuit.
    March 9, 1931.
    Norman A. Eisner, of San Francisco, Cal., for appellant.
    Geo. J. Hatfield, U. S. Atty., and Esther B. Phillips, Asst. U. S. Atty., both of San Francisco, Cal., for appellee.
    O. K. Cushing, Charles S. Cushing, Sidney M. Ehrman, and Erwin E. Richter, all of San Francisco, Cal., and Warren Olney, Jr., J. M. Mannon, Jr., A. Crawford Greene, and John W. Parker, all of San Francisco, Cal., amici curias.
    - Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges.
   WILBUR, Circuit Judge.

Mary Buck, the appellant, is the widow of John A. Buck, who died April 6, 1923. By an order of the superior court of the state of California in and for the city and county of San Francisco, in probate, she was given a family allowance of $7,500 a month to date from the time of death. Between that date and December 6,1923, she received $60,-000 from the estate by way of family allowance. She returned this amount as part of her income for the year 1923 in reporting to the federal authorities. She paid a total tax on her income of $10,271.41. Without the $60,000 so returned by the appellant as part of her income the tax would have been only $508.01. She brought this action to recover the difference, $9,763.48. Her contention is that the widow’s allowance paid pursuant to-an order of the superior court is not subject to tax as income.

The money paid by the estate to the widow as a family allowance is quite distinct from her rights, if any, in and to the corpus or income of the estate. It is awarded to her by reason of her widowhood for her support during the administration of the estate and she is entitled to the same regardless of whether or not she has any right in and to the corpus of the estate or its income. Her right to the family allowance is purely statutory. Estate of Dargie, 162 Cal. 51, 121 P. 320. Under the law of California all the property of the decedent, whether income or corpus of the estate, is liable for the payment of family allowance. Code Civ. Proc. Cal. §§ 1452, 1453, 1464, 1466, 1467, 1516, 1646; Estate of Treat, 162 Cal. 250, 121 P. 1003; Estate of Whitney, 171 Cal. 750, 154 P. 855.

The question presented to us is whether or. not this payment so made to her is income within the meaning of that term as used in the laws of the United States imposing taxes upon income.

The Sixteenth Amendment to the Constitution of the United States authorizes Congress to impose “taxes on incomes, from whatever source derived, without apportionment among the several states,” etc. Congress, in 1921, enacted legislation in pursuance of which the tax here involved was imposed. This legislation contains an elaborate definition of gross income and includes therein almost the exact language of the Constitution, “ * gains or profits and income derived from any source whatever.” Section 213 of the Revenue Act of 1921, 42 Stat. 237. This language was continued in the Revenue Act of 1924, 43 Stat. 267, § 213, and Act Feb. 26,1925, 43 Stat. 997, § 12 (26 USCA § 954); Revenue Act 1926, 44 Stat. 23, § 213 (26 USCA § 954), and was also included in the earlier revenue acts beginning immediately after the adoption of Amendment 16. Act Oct. 3,1913, 38 Stat. 114,166; Revenue Act 1916, 39 Stat. 757, § 2 (a); Act Oct. 3, 1917, 40 Stat. 329, § 1200; Revenue Act 1918, 40 Stat. 1065, § 213.

The Supreme Court, in Gould v. Gould, 245 U. S. 151, 38 S. Ct. 53, 62 L. Ed. 211, held that alimony paid to a divorced wife under a decree of court was not income within the meaning of the Act of Oct. 3, 1913 (38 Stat. 114, 166, § 2A, subd. 1, and B). We quote from that decision as follows:

“The use of 'the word itself in the definition of ‘income’ causes some obscurity, but we are unable to assert that alimony paid to a divorced wife under a decree of court falls fairly within any of the terms employed.
“In Audubon v. Shufeldt, 181 U. S. 575, 577, 578, 21 S. Ct. 735, 736, 45 L. Ed. 1009, we said: ‘Alimony does not arise from any business transaction, but from the relation of marriage. It is not founded on a contract, express or implied, but on the natural and legal duty of the husband to support the wife. The general obligation to support is made specific by the decree of the court of appropriate jurisdiction. * * * Permanent alimony is regarded rather as a portion of the husband’s estate to which the wife is equitably entitled, than as strictly a debt; alimony from time to time may be regarded as a’portion of his current income or earnings. * * *’
“The net income of the divorced husband subject to taxation was not decreased by payment of alimony under the court’s order; and, on the other hand, the sum received by the wife on account thereof cannot be regarded as income arising or accruing to her within the enactment.”

We are unable to distinguish the ease at bar in principle from the situation in Gould v. Gould, supra. A family allowance to the widow from the assets of her husband for her support, pending the administration of his estate after the dissolution of the marital community by the death of the husband, is not dissimilar in principle from alimony allowed to her from his estate or earnings after the dissolution of the marital community by divorce. We will not further pursue the obvious analogies. Later decisions by the Supreme Court dealing with the power of Congress under the Sixteenth Amendment to the Constitution have clarified the meaning of “income” as used therein and in the laws enacted in pursuance thereof. In the case of Eisner v. Macomber, 252 U. S. 189, 40 S. Ct. 189, 193, 64 L. Ed. 521, 9 A. L. R. 1570, the Supreme Court dealt with the power of Congress to tax a stock dividend under the Sixteenth Amendment. The court there said:

“After examining dictionaries in common use (Bouv. Law Dict. [Vol. 2, page 1527]; Standard Diet.; Webster’s Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton’s Independence v. Howbert, 231 U. S. 399, 415, 34 S. Ct. 136, 140, 58 L. Ed. 285; Doyle v. Mitchell Bros. Co., 247 U. S. 179, 185, 38 S. Ct. 467, 469 (62 L. Ed. 1054), ‘Income may he defined as the gain derived from capital, from labor, or from both combined,’ provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case, 247 U. S. 183,185, 38 S. Ct. 467, 469, 62 L. Ed. 1054.
“Brief as it is, it indicates the characteristic and distinguishing attribute of income essential for a correct solution of the present controversy. The government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word ‘gain,’ which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. ‘Derived — from—capital’; ‘the gain — derived—from—capital,’ etc. Here we have the essential matter: not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however invested or employed, and coming in, being ‘derived’ — that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal — -that is income derived from property. Nothing else answers the description.
“The sama fundamental conception is clearly set forth in the Sixteenth Amendment — ‘incomes, from whatever source derived’ — the essential thought being expressed with a conciseness and lucidity entirely in harmony with the form and style of the Constitution.”

See, also, Merchants’ Loan, etc., Co. v. Smietanka, 255 U. S. 509, 41 S. Ct. 386, 65 L. Ed. 751, 15 A. L. R. 1305; Goodrich v. Edwards, 255 U. S. 527, 535, 41 S. Ct. 390, 65 L. Ed. 758.

Under these decisions it is clear, we think, that the payment to the widow is not income within the meaning of that term as used in the Constitution and in the laws of Congress, as interpreted by our Supreme Court.

On the former hearing of this ease the district attorney claimed that the family allowance was taxable under section 213(a) of the Revenue Act of 1921. The proposition was stated in the brief of the government as follows: “On the other hand, on what law does appellant rely as a basis for claiming a deduction? The provisions of Section 213 (a) quoted above at page 3 are intended to cover all income received by the individual taxpayer ‘of all kinds and from whatever source derived,’ unless a specific exception is provided. In other words, unless a taxpayer can point to the provision in the statute which excepts a particular kind of income, then the income is taxable.” While the appellant stated her view as follows: “The test of whether it [the family allowance] is or is not income to the widow is whether or not the distribution was of income or corpus.”

The district attorney, it should be stated, does not on this rehearing now claim that the family allowance as such is income, and therefore, in effect, acquiesces in the foregoing statement as to the effect of the above-cited decisions of the Supreme Court, but claims that in the ease at bar the family allowance was actually paid from the income of the estate, and that the appellant, as an executrix of the estate, for that reason deducted the amount of the family allowance paid to her as widow from the amount of the taxable income of the estate; and in pursuance of the same theory made the return of the amount of the family allowance so paid to her from the income of the estate as her income taxable to her, and paid the tax levied thereon in accordance with her individual return. Thus, it is pointed out, if she now recovers herein on the tax so paid, income of the estate to the extent of $60,000 will have escaped taxation, and that as the statute of limitations will now prevent a reassessment of the income tax due from the estate, the government will lose the amount of the tax properly payable thereon, and that this loss will be a direct result of the manner in which the appellant acted in her dual capacity of eoexecutrix and widow. The appellant waited four years to file her claim for a refund of this tax with the Commissioner, and did so on the last day for filing the claim, which was also the last day for the reassessment of the income tax of the estate (March 15, 1928). See section 250(d), Revenue Act 1921 (42 Stat. 265); sections 3226, 3228, Rev. St., as amended by sections 1316, 1318, Revenue Act 1921 (26 USCA §§ 156, 157). If the test as to the taxability of the family allowance was that suggested by the appellant, namely, as to whether or not the distribution or payment to her was from the income of the estate, it might well be held that the admission of the appellant, resulting from the return of the income of the estate to the Commissioner for the purpose of fixing the tax thereon would be a sufficient evidence that the widow’s allowance was actually paid from the income of the estate, to sustain the decision of the trial court; but we do not agree with this contention. It should be added also that appellant claims that the taxability of the family allowance cannot be based upon the fortuitous circumstance as to the actual application of income or corpus of the estate to the payment of the family allowance, but rather upon the laws of the state of California which make the family allowance payable from the corpus of the estate, and upon the provision of the Revenue Act of 1921, § 403 (42 Stat. 279), which allows a deduction from the corpus of the estate of the amount paid for family allowance for the purpose of determining the net amount of the estate subject to the estate tax, and upon the decisions of the Board of Tax Appeals that the family allowance is not properly deductible from the income of the estate in fixing the amount thereof subject to taxation. Estate of W. S. Taylor, 9 B. T. A. 255; Estate of Ames, 14 B. T. A. 1067.

Upon the issue thus presented by the parties we adhere to the views expressed in our former opinion, as follows:

“We think it quite immaterial in determining the taxability, of the amount received by the widow as to whether it comes from the corpus or income in the hands of the executors. * ‘ * As a reason for her position that the money received by her as family allowance is not income, appellant contends that the executors are not entitled to deduct from the income of the estate taxable under provisions of section 219 (a), 42 Stat. 246, any payments made to the widow as family allowance. Subdivision (c) of this section (section 219) provides that in determining the income of estates during the period of administration there shall be deducted any income properly paid or accredited to any legatee, heir or other beneficiary, but appellant contends that this exception is not broad enough to cover the payment made to the widow as a family allowance and claims that as it cannot he deducted from the income for which the estate is taxable, it cannot be properly taxed as income in the hands of the widow.
“In support of appellant’s contention' that the deduction made to the estate is not a proper one, a decision by the Board of Tax Appeals is cited (Estate of Tyler, 9 B. T. A. 255). Also, Charles Lesley Ames, Executor of the Will of Charles W. Ames, B. T. A. Dec. 4730, 14 B. T. A. 1067. The Government, however, contends to the contrary that in estimating the income of the estate for taxation purposes the executors were entitled to a deduction of the amount paid the widow as a family allowance under section 219 (c), and it is stipulated herein that the estate was in fact allowed a deduction of $60,000 paid to the widow in arriving at the net income for purposes of taxation.
“We do not think it necessary in this case to determine whether or not the executors of an estate having paid a family allowance from the income thereof are entitled to have the same credited against their gross income in determining the net income for the purpose of taxation. That question does not arise in this ease.”

The judgment in favor of the government must be reversed upon the authority of the above-cited decisions of our Supreme Court called to our attention in this ease for the first time by the petitions for a rehearing.

Judgment reversed.


author: SPARKS, Circuit Judge.

text:
    CENTRAL STATES GRAIN CO-OPERATIVE, Inc., v. NASHVILLE WAREHOUSE & ELEVATOR CORPORATION et al.
    No. 4411.
    Circuit Court of Appeals, Seventh Circuit.
    March 13, 1931.
    Harvey B. Hartsock and Charles M. Wells, both of Indianapolis, Ind., for appellant.

      Burke G. Slaymaker, Clarence F. Merrell, Albert Ward, Theodore L. Locke, and William P. Herod, all of Indianapolis, Ind., for appellees.
    Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.
   SPARKS, Circuit Judge.

This is a ease in which appellant sues (1) Nashville Warehouse & Elevator Corporation, hereafter referred to as the warehouse, on a warehouse contract; (2) Grain Dealers’ National Mutual Pire Insurance Company, hereafter referred to as the insurance company, on a policy of fire insurance executed and delivered to appellant against the loss or damage of its grain by fire; and (3) nine other insurance companies, hereafter referred to as indemnitors, on their several indemnity contracts issued to the warehouse indemnifying the warehouse against loss resulting from the destruction or damage of grain owned by it, and also against loss which it might sustain by the damage or destruction of grain owned by others.

The bill of complaint contains the following allegations: The warehouse owned and operated a public warehouse licensed under the Act of Congress of August 11, 1916, as amended July 24, 1919, and the rules and regulations made thereunder, which provides that such warehousemen, for all agricultural products received by them to be warehoused, must issue warehouse receipts stating, among other things, identification of the grain; and providing that such grain should be stored in an individual bin or compartment designated by lot or cargo numbers, or by letters, numbers, or other clearly distinguishable words or signs, securely affixed, or so 'marked and placed in the warehouse that the identity of such grain will not be lost. Said warehouse was located at or near Indianapolis, and consisted of two or more buildings, one of which was of wood construction and the others were of concrete.

On or between September 17 and November 2, 1928, appellant delivered to the warehouse about 16,880 bushels of wheat and 2,551 bushels of oats, for which the warehouse issued to appellant United States warehouse receipts, none of which stated that the identity of any of the grain was to be preserved or gave any identification whatever, nor was there any agreement to that effect; and all the grain thus received became a part of the entire mass of grain contained in. the warehouse. Prior to September 17,1928, the insurance company issued to appellant its policy in suit, in the sum of $25,000, whereby it insured appellant against loss or damage by fire to the grain so deposited.

Prior to November 3, 1928, the indemnitors issued to the warehouse their policies of insurance — and they were in force on the last named date — by which they agreed to indemnify the warehouse for such loss as might be sustained by reason of damage to, or destruction of, any grain contained in its elevator, whether such grain belonged to the warehouse or was held by it in storage or in trust or for the benefit of any other. The aggregate amount of said indemnifying policies exceeded $100,000.

Appellants are unable to 'describe the last-named policies in greater detail or to set forth copies by reason of the fact that they were in the possession and under the control of the indemnitors. The bill does allege, however, that the indemnitors’ policies inured to the benefit of all storers of grain in said warehouse during the time said policies were in force.

On November 3,1928, a fire destroyed the wooden part of the elevator belonging to- the warehouse and damaged the remaining part, causing great damage to all the grain stored in the wooden building and some damage to the grain stored in the concrete buildings. As to the exact amount of damage to the grain, appellant has no information, and has been unable to ascertain it, but such information is within the knowledge of appellees.

Prior to the fire, the warehouse had not delivered to appellant any grain, and at the time of. the fire appellant was entitled to have delivered to it, by the warehouse, grain of the kind, quality, and quantity as represented by said warehouse receipts, whieh was then of the value of $26,831.54. Since the fire, the warehouse has delivered to appellant 3,-561 bushels of damaged wheat of the value of $3,488.40, leaving the sum of $23,353.14 due and owing to appellant from appellees; but the proportion thereof due from each appellee is unknown to appellant, and is unaseertainable by it without the aid of the court. The bill alleges that timely notice of its loss was given by appellant to appellees; and within sixty days after the fire the warehouse and the indemnitors denied liability therefor, and claim that indemnitors’ policies do not inure to the benefit of appellant, and that all of appellant’s grain was stored in the wooden portion of said elevator. The bill further alleges that appellant is without knowledge sufficient to make positive allegations as to values or amounts of grain stored, grain damaged, lost or salvaged, or of the amounts or terms of the policies issued other than that of the insurance company, and a determination of this cause will involve a long, intricate, and arduous computation and accounting, and it is impossible to file an appropriate complaint upon the law side of the court; that all policies of insurance covering the grain destroyed as aforesaid must contribute to the payment of said loss, and, in order that the respective rights of all the parties hereto may be equitably adjusted and determined, it is necessary that this cause be filed on the equity side of the court.

The bill prays for an accounting to determine (a) the amounts and kinds of grain damaged, destroyed, and salvaged; (b) the proportions, amounts, and extent to which appellant’s grain was damaged, destroyed, and salvaged; (e) what grain, if any, the warehouse is obligated to deliver to appellant; (d) the amount of damage suffered by appellant; and (e) the proportions thereof for which each of the appellee insurers is respectively liable.

On motion of the indemnitors, the District Court dismissed the bill on its merits, and from this decree appellant appeals.

' Owing to the fact that neither the originals nor copies of indemnitors’ policies are filed with the bill, we are limited in our discussion of them to appellant’s allegations of fact with relation thereto. These allegations, however, are made with certainty and under oath, and we think they are quite sufficient to determine the questions presented.

Appellant describes these contracts as policies of insurance by which indemnitors agreed to indemnify the warehouse for such loss as might be sustained by reason of damage to, or destruction of, any grain contained in its elevator, whether such grain (1) belonged to the warehouse, or (2) was held by the warehouse in storage or in trust for the benefit of any other. From the other allegations of the bill, it is quite clear that the relation existing between appellant and the warehouse is that of bailor and bailee, and it is well settled that a bailee is liable to the bailor only for such damage to the bailment property as results proximately from the negligence or willfulness of the bailee. Rice v. Nixon, 97 Ind. 97, 49 Am. Rep. 430; Drudge v. Leiter, 18 Ind. App. 694, 49 N. E. 34, 63 Am. St. Rep. 359. Neither negligence nor willfulness being alleged, we may assume that the warehouse is not liable to appellant for the damage done to appellant’s grain by reason of the fire. Nor could the warehouse maintain an action against the indemnitors for appellant’s loss. A contract to indemnify and hold harmless is not an original covenant to pay, but is rather an undertaking to repay or reimburse the indemnitee or make good to him the actual loss which he may suffer. One of the characteristic differences between a contract of indemnity and one to pay legal liabilities is that upon the former an action cannot be brought and recovery had until the liability indemnified against is discharged; whereas upon the latter the cause of action is complete when the liability attaches. That there is a distinction between a covenant to pay money and a covenant to indemnify is .well recognized. In re Lathrop, Haskins & Co. (C. C. A.) 216 F. 102; Central Trust Co. v. Louisville Trust Co. (C. C. A.) 100 F. 545; Derry v. Morrison, 8 Ind. App. 50, 34 N. E. 107. This court, in United States Fidelity & Guaranty Co. v. Vermont Marble Co., 16 F.(2d) 83, held that, where one has agreed to indemnify another, a plaintiff not named as the indemnitee may not maintain an action on such indemnifying instrument where there is no promise to such plaintiff in the instrument sued on. This principle is supported by In re Gubelman (C. C. A.) 13 F.(2d) 730, 731, 48 A. L. R. 1037; Young v. Schlosser, 65 Ind. 225; E. I. DuPont De Nemours & Co. v. Ferguson, 86 Ind. App. 429, 158 N. E. 488.

In the Gubelman Case above referred to the court said:

“The rule that may be formulated under the federal decisions permits a third person not a party to a contract to enforce the promisor’s obligation only where he is'the beneficiary solely interested in the promise, and in such case it must appear that the parties in-' tended to recognize the third person as a primary party in interest.”

There are no allegations in the bill to indicate that the warehouse and the indemnitors intended to recognize appellant as a party in interest; and it is quite evident that appellant, before the fire, did not rely for protection upon indemnitors’ policies, inasmuch as appellant secured sufficient insurance in its own name and on its own grain to fully cover its loss, which insurance was in force at the time of the fire, and that policy is now in suit in this cause. The warehouse was in no manner obligated to insure appellant’s grain. No money had been advanced by the warehouse to appellant on the grain, and, so far as the bill reveals, there was nothing due from appellant to the warehouse, and there was no reason why it should secure protection other than that afforded by an indemnifying policy which would be available in case a fire should occur under such circumstances as would render it liable as bailee. Such circumstances did not arise, and appellant does not claim liability on the part of the bailee on account of the fire. Certainly the warehouse could not recover on indemnitors’ policies until a loss to it is shown; and to say that under such circumstances the appellant can recover from indemnitors would indeed be inconsistent.

Appellant contends that the word “indemnify” as used in the bill in describing the policies should not be emphasized so as to limit the effect of those policies to mere indemnity of the warehouse, but that said indemnity should extend to and include appellant by reason of the clause which immediately follows the words, “agreed to indemnify the Warehouse,” viz., “for such loss as might be sustained by reason of damage or destruction of any grain contained in the elevator, whether such grain belonged to the Elevator Corporation, or was held in storage or in trust or for the benefit of any other.” This clause merely refers to the subject-matter upon which the indemnity is to operate, and is in no manner descriptive of the party or parties to whose benefit the indemnity shall inure. Appellant is not named as an indemnitee, either directly or indirectly, and to classify it as such would be doing violence to the language employed. It may be true that appellant’s grain was contained in the warehouse, and that it is fully described and included in the terms of the last-quoted sentence referred to above; it must be borne in mind, however, that indemnitors’ policies did not insure grain, but they indemnified the warehouse for any loss it might sustain on such grain by reason of fire.

The bill alleges that indemnitors’ policies inure to the benefit of appellant, but this is merely a conclusion. Of course, it is not harmful to allege a conclusion, provided it is not inconsistent with the faets already pleaded; but where, as in this ease, the pleaded faets are inconsistent with the conclusion, the conclusion must be disregarded.

Appellant calls our attention to Home Insurance Co. v. Baltimore Warehouse Co., 93 U. S. 527, 545, 23 L. Ed. 868, and says that case is the very basis of the bill. • In that ease the Home Insurance Company insured the Baltimore Warehouse Company against loss or damage by fire to the amount of $20,000 on merchandise, hazardous or extrahazardous, their own or held by them in trust, or in which they had an interest or liability, contained in a certain described warehouse. • The warehouse company, previous to the fire, had also taken out a policy, substantially in the same form as that issued by the Home Insurance Company, from the Associated Firemen’s Insurance Company of Baltimore in the sum of $10,000. Various parties had deposited cotton in storage with the warehouse company as bailee, which company required such depositors to secure separate insurance against fire on their respective property, in their own names, and providing that loss, if any, should be payable to Baltimore Warehouse Company; and this rule, with but few exceptions, was complied with. Practically all of the depositors’ policies were held by the warehouse company, and to most of the depositors the warehouse company had advanced money., The warehouse company sued the Home. Insurance Company on the policy which that company had issued, in which suit the warehouse company sought to recover from the Home Insurance Company that proportion of the total loss of all the cotton which the amount of the policy of the Home Insurance Company bore to the total amount of all the policies, both general and special. It was contended by the Home Insurance Company that its policy covered only the warehouse company’s interest in]the goods contained in the warehouse. The court, in affirming the trial court, stated that the policy in suit covered the merchandise held by the warehouse company in storage, and not merely the interest of the bailee in that property, and that therefore the insurers were liable pro rata, and should contribute proportionately. It may also be noted that each warehouse certificate, pursuant to its charter, contained on its face a notice that the property mentioned therein was held by the corporation as bailees only, and was not insured by the corporation. The court said, with relation to this subject: “But we are unable to perceive how these facts can have any bearing on the proper construction of the policy. The company was not prohibited by its charter from obtaining insurance to their full value of the goods Ieft”with them in bailment. At most, the requirement of the charter was that they should not themselves become insurers.”

It will be noted in the case just cited that the policy was not an indemnifying one, but that it specifically insured all the contents of the warehouse which were owned by such warehouse or which were held by it as bailee, and insurer’s- liability was not limited to the interest alone of the warehouse. In the instant ease, however, no such language is used. Instead of insuring the contents of the warehouse, it only indemnifies the warehouse against its loss. We think the distinction is quite clear, and that under the decisions referred to in the foregoing opinion there can be no liability on the part of indemnitors.

There being no liability in this action on the part of either the indemnitors or the warehouse, it necessarily follows that the Act of Congress of August 11, 1916, 39 Stat. 486, as amended by Act Feb. 23, c. 106, 42 Stat. 1282 (7 USCA §§ 241-273), is not involved, and the federal court is without jurisdiction; it being admitted that there is no jurisdiction by reason of diversity of citizenship.

Decree affirmed.


author: DAVIS, Circuit Judge.

text:
    DONATO v. UNITED STATES.
    No. 4492.
    Circuit Court of Appeals, Third Circuit.
    March 18, 1931.
    George R. Sommer, of Newark, N. J., for appellant.
    Phillip Forman, U. S. Atty., of Trenton, N. J., and Horace C. Jeffers, Asst. U. S. Atty., of Morristown, N. J.
    Before WOOLLEY and DAVIS, Circuit Judges, and THOMPSON, District Judge.
   DAVIS, Circuit Judge.

This is an appeal from a decree of the District Court" adjudging the defendant guilty of contempt for violating its injunctive order.

On June 26,1928, the United States attorney filed a bill for an injunction to abate a nuisance alleged to have been maintained on the premises known as the Colonial Inn, in Singae, Passaic county, N. J. In due course the case was tried, and on April 12, 1929, the court found that a nuisance was maintained on the premises and the defendants,, including Donato, were on April 22, 1929, enjoined from manufacturing, selling, bartering, or storing on the premises or any part thereof any liquor containing one-half of 1 per cent, or more of alcohol by volume, and the barroom was padlocked for one year. Subsequently the appellant filed a bond in the sum of $1,000 conditioned that the law would not be violated in the padlocked portion of the premises, and the decree was thereupon modified to the extent that the premises might be used for legal purposes.

On September 10, 1929, an information was filed, charging Donato with contempt of court for violating the decree by keeping and selling on the padlocked portion of the premises intoxicating liquor fit for beverage purposes and containing more than one-half of 1 per cent, of alcohol by volume.

The defendant was apprehended on a beneh warrant. He pleaded not guilty, was tried by the court, found guilty of contempt, and sentenced to 90 days in jail.

He appealed to this court, and says the decree of contempt should be reversed be-: cause the contempt was civil and not criminal, and therefore he was improperly sentenced for a fixed term.

The question of whether contempt under section 24 of the National Prohibition Act under which the court here proceeded is civil or criminal has been decided at least twice before, and both times it was held that the proceedings for violation of an injunction under this section were criminal in nature. Pino v. United States, 278 F. 479 (C. C. A. 7); McGovern v. United States, 280 P. 73 (C. G. A. 7), certiorari denied 259 U. S. 680, 42 S. Ct. 464, 66 L. Ed. 1073.

One of the important tests in determining whether contempt is civil or criminal is the purpose of the punishment. If the purpose of the punishment is remedial, intended to bring about the performance of an aet which the court had commanded for the benefit of the injured party, the contempt is civil. But if the public is a party and the punishment for doing a forbidden act is punitive, to vindicate the authority of the court, the contempt is criminal. In re Kahn et al. (C. C, A). 204 P. 581; Biderman v. Cooper (C. C. A.) 273 P. 683; Doyle v. London Guarantee, etc., Co., 204 U. S. 605, 27 S. Ct. 313, 51 L. Ed. 641; Gompers v. Buck’s Stove, etc., Co., 221 U. S. 418, 31 S. Ct. 492, 55 L. Ed. 797, 34 L. R. A. (N. S.) 874. The application of this test to the facts of the case at bar plainly shows that the contempt was criminal and not civil.

There is no merit in the argument of the appellant that, if this is criminal contempt, he has been deprived of his right to a trial by jury as provided in the Act of October 15, 1914, c. 323, §§ 21 and 22 (28 USCA §§ 386 and 387). In contempt proceedings, a defendant is not entitled to a trial by jury without statutory authority, and then only in the particular cases to which the statute applies. The provisions of sections 21 and 22 of the Act of October 15, 1914, are not available in proceedings under section 24 of title 2 of the National Prohibition Act (27 USCA § 38). Couts v. United States (C. C. A.) 249 F. 595; Lewinsohn v. United States (C. C. A.) 278 F. 421, 428; McGibbony v. Lancaster (C. G. A.) 286 P. 129; Maynard v. United States, 57 App. D. C. 314, 23 F.(2d) 141; Eilenbecker v. Plymouth County, 134 U. S. 31, 10 S. Ct. 424, 33 L. Ed. 801; Michaelson v. United States, 266 U. S. 42, 45 S. Ct. 18, 69 L. Ed. 162, 35 A. L. R. 451. The Act of October 15,1914, c. 323, §§21 and 22 (28 USCA §§ 386, 387).

The appellant argues that he gave a bond at the time of the final decree entered in the padlock proceedings for the express purpose of settling the punishment which would be imposed on him in the event that he should violate the terms of the decree; and consequently the contempt proceedings were an attempt to subject him to double jeopardy. This contention is unsound, for the reason that the facts in this ease do not constitute double jeopardy as defined by the cases. The constitutional prohibition is not against double punishment, but against being, “twice put in jeopardy,” double trial. Bens v. United States, 266 P. 152,159 (C. C. A. 2); United States v. One Buick Coach Automobile (D. C.) 34 F.(2d) 318, 321; United States v. Ball, 163 U. S. 662, 669, 16 S. Ct. 1192, 41 L. Ed. 300.

It is urged that, if there was a violation of the law on the appellant’s premises, it did not take place in the padlocked portion thereof. The decree was directed against “the entire barroom in the two story frame building.” The barroom referred to was after the entry of the decree enlarged by increasing its length about seven feet. After the enlargement, the barroom was called the “grill-room.” The prohibition agents purchased liquor and obtained several samples of beer, it is contended, in this enlarged portion of the room. The appellant cannot thus escape the consequences of his conduct by what amounts to a subterfuge.

The appellant insists that in contempt proceedings of this kind, it must be shown, that there has been a willful and continuous violation of the court’s order. Webb v. United States (C. C. A. 8) 14 F.(2d) 574, 49 A. L. R. 612. This objection must likewise fail. It is true in the present case that the government’s evidence actually shows violations of the decree on one night only. But a single sale may be made under circumstances which establish the maintenance' of a nuisance. Lewinsohn v. United States, 278 F. 421 (C. C. A. 7); Singer v. United States (C. C. A.) 288 F. 695; Schechter v. United States, 7 F.(2d) 881 (C. C. A. 2); Hermansky v. United States, 7 F.(2d) 458 (C. C. A. 8). However, we are here not dealing* with the establishment of a nuisance, but with the violation of a decree forbidding specified conduct after the maintenance of a nuisance has been established.

The evidence clearly establishes the deliberate violation of the injunctive order of the court. The learned District Judge did not commit error, and the decree is affirmed.


text:
    AMERICAN CAN CO. v. M. J. B. CO.

    No. 6155.
    Circuit Court of Appeals, Ninth Circuit.
    March 16, 1931.
    John C. Carpenter, of Chicago, Ill., for appellant and cross-appellee.
    H. U. Brandenstein, of San Francisco, Cal. (Richard J. Cook, of Seattle, Wash., of counsel), for appellee and cross-appellant.
    Before RUDKIN and WILBUR, Circuit Judges, and NORCROSS, District Judge.

      Rehearing denied May 11, 1931.

   WILBUR, Circuit Judge.

This is an action for the infringement of patent No. 1,586,277), issued by the United States to John M. Young, now owned by the appellant, covering a familiar type of tin can, a right cylinder, used as container for food products, such as coffee, butter, etc. The type of ean involved is one in which the cover is severed from the cylindrical body upon opening, by removing from the upper end of the outer cylindrical surface a tearing strip of familiar design. The object of the invention is to utilize the top portion of the can as a reelosure cover to be used after the ean is opened by removal of the tearing strip, the cover fitting tightly enough to form a closure that will protect the contents of the ean. The method of thus utilizing the top portion of the can for reeoverage in order to protect the contents of the can is common in the canning industry. The.contents are sometimes preserved by what is known as an •outside slip cover, fitting over the outer portion of the can at the top (a familiar example of this type of cover being the old-fashioned tin dinner-pail). In appellant’s patent the air-tight closure is effected by friction between a countersunk part of the top and a ring or bulge at the top of the can and on the face of its interior wall. When the top is forced down inside the can, this countersunk part of the top contacts with the bulge or ring on the inside of the ean. Claims contained in the appellant’s patent, issued May 25, 1926, known as the Young patent, deal with the latter form of can, in which the countersunk portion of the top, when removed and replaced for reeoverage, upon depression comes in contact with an inner ring or bulge formed on the inside of the ean, spoken of in the briefs as an inner fold, bend or bead.

In view of the fact that the argument narrows the alleged invention to a single element in this combination, we can largely confine our consideration to that element. Appellant’s claim is narrowed in the briefs to the single item of the offsetting of the annular depending ring or countersink in the top of the ean from the side of the can. to the exact distance that the inner ring, bend, or fold projects into the inside of the can, so that upon removal of the tearing strip the countersunk portion of the top slips inside this inner ring, bend, or fold, with a snug fit, thus sealing the contents.

The accompanying diagram of vertical cross sections, one through a portion of appellant’s can, and the other through a portion of appellee’s can, which are substantially as set forth in the briefs of the par- ■ ties in connection with their respective contentions, illustrate the point thus advanced by the appellant:

We have indicated in cross-hatching, and have marked “X” on each diagram, the portion of the top of ean body, in each of the two cans, which appellant claims is covered by the Young patent.

We restate the above proposition in the language of the appellant:

“The thing that was not known or old was the insetting or offsetting of the bung or internal reclosure from the seam by the thickness of the fold or bend so that the material of the can body part which contained the score lines may extend down from the seam on the outside of the fold in a single cylindrical plane to the bottom of the fold or bend itself. The construction of the ean beneath the fold or bend is, we submit, unimportant to the consideration of the claims because the structure in which the invention is embodied is located wholly above this portion of the ean body.”

In view of the claim that the shoulder “X” of the appellee’s can infringes the offset “X” of the appellant’s patent, it should be stated that the basis of this contention is the assumption that the 3-ply portion of the appellee’s can is the equivalent of the internal fold or bend of the appellant’s can, which is marked 18 on the above drawing. It is significant that when the application for appellant’s patent was pending before the Patent Office, the Examiner in the Patent Office called the attention of the applicant to the similarity between his method of reclosure and that involved in the Ginzler patent (British, 1910). A diagram of a vertical cross section, of the Ginzler.can is here shown:

It will be observed that in the Ginzler can the inner portion of the cap or cover contacts with an interior bend or fold in the side of the ean. The original claims presented by the applicant were rejected by the patent Examiner for lack of novelty over the Ginzler. Attention was also called by the Examiner to a prior French patent to Delpeut and a British patent to Spindler. Thereupon the claims of the Young application were amended to read as they appear in the patent in suit. The written amendments were presented to the Patent Office with the accompanying statement on behalf of the applicant that the patents referred to had been carefully examined, and that:

“In the Ginzler patent there is an upward bend, but it does not extend inward towards the middle of the ean, and the upper and lower parts of the can wall have to be out of line with each other to accommodate such a fold. This fold lies parallel with and against the inner face of the can wall and has not the yielding and gripping features of my bend 18. My claims distinguish very clearly from a construction like that in the Ginzler patent. It will be noticed also that in this patent there is no preformed (delineated by score lines) tearing strip but a rude and rough tear is made through the material of the can wall by a stiff internal tearing element, so that this can is entirely unsuitable to provide a replaceable cover.
“In the Spindler and Delpeut patents a replaceable cover may be formed, but it is an outside slip cover.
“I believe that I am the first to provide a can body with an inwardly extending bend, integral with the body, and with a plug closure to fit within said bend and similarly offset inwards from the double seam of the cover and from the can wall.”

No further objections being raised in the Patent Office, the patent in suit was issued to John M. Young,- assignor of appellant.

It thus appears that the appellant, in securing his patent, differentiated the inner ring or fold in his device from that in the Ginzler .patent, although in the Ginzler patent the folds extend inside the can, that is the .can bulges inwardly at the point of the fold; whereas, in the appellee’s can the side of the can is vertical in its cross section from the bottom of the can to the upper edge of the collar or band which is produced on the outside of the can at its upper end by an outward double folding of the metal blank or sheet from which the can is formed.

It is well settled that, where an applicant whose claim is rejected on reference to a prior patent, without objection or appeal, voluntarily restricts himself by an amendment of his claim to a specific structure, “having thus narrowed his claim * * * in order to obtain a patent the patentee may not by construction, or by resort to the doctrine of equivalents, give to the claim the larger scope which it might have had without the amendments, which amount to a disclaimer.” Weber Elec. Co. v. Freeman Elec. Co., 256 U. S. 668, 677, 41 S. Ct. 600, 603, 65 L. Ed. 1162.

In Royer v. Coupe, 146 U. S. 524, 532, 13 S. Ct. 166, 169, 36 L. Ed. 1073, it was stated to be well settled “that where a patentee, on the rejection of his application, inserts in his. specification, in consequence, limitations and restrictions, for the purpose of obtaining his patent, he cannot, after he has obtained it, claim that it shall be construed as it would have been construed if such limitations and restrictions were not contained in it.” (Citing prior decisions of the Supreme Court to this effect.)

In the amended claims, 1, 2, 3, and 5, relied on by appellant, which we presently quote, it will be observed that each claim speaks of this inner extension of the can body, and the offset equal thereto in the top. These claims are as follows:

“1. A can, comprising a body having score lines setting off a circumferentially arranged tearing strip near the top, the material of the body being bent inwardly within the body adjacent said tearing strip, and away from the line of that part of the can wall which is attached to the cover, and a cover seamed to the upper end of the body and having a downwardly extending friction wall arranged inwardly at a distance from the seam between the cover and body a distance equal to the inward extension of the bend of the body, said friction wall being adapted to enter within the bend after the tearing strip is removed to form a tight and readily removable closure.
“2. A can, comprising a body having score lines setting off a circumferentially arranged tearing strip near the top, the material of the body being bent inwardly within the body adjacent and spaced away from said tearing strip, and a cover seamed to the upper end of the body and having a, downwardly extending friction wall offset inwardly from the external wall of the cover above the bend of the body in amount equal to the horizontally inward extension of the bent portion of said body.
“3. A can, comprising a body provided with encircling score lines setting off a tearing strip, said body being bent internally near the top to provide an external friction seat wall of accurate dimension at the top of the body when the tearing strip is removed, and a cover seamed to said body and having an inwardly spaced vertically arranged inner friction wall of horizontal diameter equal to the internal diameter of said external friction seat wall.”
“5. A can comprising a body and a cover double seamed to said body, the cover having the usual countersunk portion adjacent the double seam, and having in said countersunk portion another depression of less diameter than said countersunk portion forming a wall to produce an internal friction closure element and the can body having score lines around the same setting off a tearing strip adjacent the double seam, and the body wall being bent inward adjacent the lower score line to form an external friction closure element adapted to receive the said friction closure element of the cover.”

To interpret the controverted features of the appellee’s can in the terms suggested by appellant, or to reach therefrom the conclusion that, they embody an infringement of appellant’s can, would we think be to disregard the physical features which clearly present themselves to an observer who compares the two cans. As previously stated, the interior of the can-body wall of the appellee’s can is at all points straight and wholly devoid of any interior bend or fold or any equivalent of a bend or fold. We do not regard the “collar” of the appellee’s can, or the outer fold of the “collar,” as being a part of the body wall proper of the can, but view the “collar” as being a folded band on the exterior of the can-body wall. Nor do we think that in its position on the outside and at the top of the can-body wall there is created, in the conjunction of the “collar” with the adjacent portion of the can-body wall, an interior fold or bend or an equivalent thereof, at or adjacent to the portion of the interior of the can body where the vertical wall of appellee’s can cover comes in contact with the interior of the can body. At the points where the can covers come in contact with the can interiors, it is apparent that the nature of the contact and the degree of friction and of yielding, or spring action, although depending to some extent on accurate dimensioning of can-cover wall and can interior, are quite different' in the two cans. In appellant’s can the wall of its closure cover comes in contact, when a closure is made, with a fold or bend which is formed within the can body, of material integral with the can body and which, as described in the Young patent, is “bent inwardly and * * thenee downwardly * * * the material of the body wall above and beneath the loops being in the same plane”; the bend thus provided being “open so that a rounded internal surface is provided for the reception of the friction plug cover.” It may be conceded that, as is stated in the Young patent, the friction seat which is formed by the internal bend “has some yielding and spring action radially to admit the friction element of the cover and tightly conform therewith to make a good closure.” As regards appellee’s can, its cover is provided with a countersunk or depressed portion forming a vertical wall adapted to slip inside of the top of the can body. The surface of the can interior where the wall of appellee’s can cover engages and comes in contact with it is straight and smooth, and devoid of any fold or bend, and, the can interior and cover wall being accurately dimensioned, the cover slips into its proper place so as to make a good closure, with no resistance except such as arises from closeness of fit. There is, obviously, some yielding in the portion of the can body which comes in contact with the can cover when a closure is made; but in view of the absence from appellee’s can of an internal fold or bend or any equivalent thereof, and the lack of the spring action that would result from contact between such bend and the cover wall, the nature of the parts which come in contact and of the resistance or friction resulting from contact are quite different in the two cans. If, as claimed by the patentee in his above-quoted answer to the Examiner concerning the Ginzler patent, there is no inner extension of the can body in the Ginzler patent, it is even clearer that there is no inner extension of the can body in the appellee’s can. It therefore would seem clear that the shoulder “X” in the appellee’s can cannot be said to be the equivalent of the offset “X” in the can made under appellant’s patent, as there is in appellee’s can no inner rim, fold, or bend equivalent to that in the appellant’s can; hence there can be no offset in the top of appellee’s can adapted to fit within an offset in the can body created by an inner rim, fold or bend, for there is in appellee’s can body no such inner rim, fold, or bend. The differences between the can of appellee and the can of appellant in the controverted portions, while not of wide range, are in our opinion sufficiently distinct in nature, function, and results to sustain the conclusion of noninfringement which was reached by the trial court.

The defendant has filed a cross-appeal from that portion of the judgment which held the appellant’s patent valid. In view of our conclusion that there is no infringement, it is unnecessary for us to consider the validity of the appellant’s patent.

Judgment affirmed.


author: RUDKIN, Circuit Judge.

text:
    TULL & GIBBS, Inc., v. UNITED STATES.
    No. 6216.
    Circuit Court of Appeals, Ninth Circuit.
    March 16, 1931.
    Charles E. McCulloch and Ivan F. Phipps, both of Portland, Or. (Carey, Hart, Spencer & McCulloch, of Portland, Or., and Wakefield & Witherspoon, of Spokane, Wash., of counsel), for appellant.
    Roy C. Fox, U. S. Atty., and E. J. Farley, Asst. U. S. Atty., both of Spokane, Wash. (C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and John R. Wheeler, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for the United States.
    Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges.
   RUDKIN, Circuit Judge.

This was an action to recover overpayments of income and excess profits taxes for the year 1919. A demurrer to the amended complaint was sustained by the court below,, and, from a judgment of dismissal, the plaintiff has appealed.

The following statement is deemed sufficient to a proper understanding of the questions presented for decision: During the years 1917, 1918, and 1919 the appellant sold furniture and household goods on the installment plan, reserving title to the property sold until the last installment of the purchase price was.paid in full. During these years it returned its annual net income on the straight accrual basis, in accordance with regulations prescribed by the Commissioner of Internal Revenue; that is, each year it reported the entire profits on all installment sales made during the year, regardless of whether the installments were paid within the year or later. Between 1919 and 1924 numerous regulations were promulgated from time to time by the Commissioner of Internal Revenue prescribing rules for computing income on installment sales. The substance of these rules was:

“Such income may be ascertained by taking that proportion of the total payments received in the taxable year from installment sales (always including payments received in the taxable year on account of sales effected in earlier years as well as those effected in the- taxable year) which the gross profit to be realized on the total installment sales made during the taxable year bears to the gross contract price of all such sales made •during the taxable year.” Article 42 of Regulations 45, December 29, 1919.

January 4, 1924, a further regulation was promulgated providing:

“Where a taxpayer has in past years filed returns upon the cash basis or upon the straight accrual basis, but kept accounts upon the installment basis, amended returns may be filed for the purpose of reporting the income upon the installment plan in accordance with article 42 of Regulations 45 and 62.”

March 12, 1925, the appellant filed an amended return for the year 1919 disclosing a net income for that year of $23,106.78 and a total tax of $2,064.96. The income thus reported did not include an item of $137,-366.92, representing profits on installment sales made prior to 1919,'but paid during that year. At the same time the appellant filed a claim for a refund in the sum of $51,141.50, representing an overassessment and overpayment of income and excess profits taxes for the year 1919. The Commissioner added to the net income in the amended return the item of $137,366.92, representing profits on sales made pri'or to December 31, 1918, but paid during 1919, and determined that the appellant was entitléd to a refund in the sum of $16,692.69, which would be applied against deficiencies asserted by the Commissioner for the years 1920,1921, and 1923. The deficiencies thus asserted exceeded the amount of the refund allowed.

In March, 1925, the Board of Tax Appeals held that the installment sales method prescribed by the Commissioner was unauthorized, and therefore invalid. This ruling' presumably led to the enactment of the following provisions found in the Revenue Act of 1926:

“Sec. 212. (d) Under regulations prescribed by the Commissioner with the approval of the Secretary, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the total profit realized or to be realized when the payment is completed, bears to the total contract price.” 26USCA 953(d).
“See. 1208. The provisions of subdivision (d) of section 953 of this title shall be retroactively applied in computing income under the provisions of the Revenue Act of 1916, the Revenue Act of 1917, the Revenue Act of 1918, the Revenue Act of 1921, or the Revenue Act of 1924, or any of such Acts as amended. Any tax that has been paid under such Acts prior to February 26, 1926, if in excess of the tax imposed by such Acts as retroactively modified by this section, shall, subject to the statutory period of limitations properly applicable thereto, be credited or refunded to the taxpayer as provided in section 1065 of this title.” 26 USCA § 953a.

The appellant contends that profits received in 1919 on account of installment sales made in 1918 and prior years should not be included in the amended return of 1919, because such profits had already been returned and taxes paid thereon; and, further, that the profits of 1918 and prior years had become a part of the invested capital. In answer to similar contentions in John M. Brandt Co. v. United States, 40 F.(2d) 126, 128, the Court of Claims said:

“We think it is clear from a consideration of these two sections and the legislative history of the Revenue Act of 1926, that the statute expressly requires the inclusion in taxable net income in the years in which the installment sales method of accounting is employed of amounts received in those years from installment sales made in prior years, notwithstanding the profits upon such sales were reported as income by the taxpayer in such prior years in which it employed the straight accrual method of accounting. Blum’s, Inc., 7 B. T. A. 737, and Mayer & Co., 9 B. T. A. 815.
“It is further contended that, if the statute requires the inclusion in income of payments received in years subsequent to the change to the installment sales method of accounting, it imposes a direct tax upon capital without apportionment among the several states in proportion to their population in violation of section 9, art. 1, of the Constitution. There is no merit in this contention. The amounts taxed represent profits on installment sales effected in years prior to 1918, and the tax therefore is necessarily one upon ineome and not upon capital. Sueh amounts do not lose their character as income merely because, under a new method of accounting which the taxpayer elected to adopt, it is required to treat them as income in a year other than the one in which they were originally reported under its method, of accounting. Profits earned subsequent to the Sixteenth Amendment to the Constitution do not become capital of a nature such as may not be subjected to income tax, although such imposition may result in taxation of such income a second time. The amounts which the defendant included in plaintiff’s taxable income for the years involved constituted income under the Sixteenth Amendment, and, such being the case, it is within the power of Congress to prescribe the time, the manner, and the method of accounting for such income for tax purposes. No attempt is made by the statute to define new objects of income. It simply provides that those taxpayers who choose to report their income in accordance with its provisions must report the income as it is reduced to possession in cash, notwithstanding the fact that some part of it had previously been returned and taxed under the accrual method of accounting employed in earlier years, and it is no defense to say that double taxation results. * * * ” (Certiorari denied, 51 S. Ct. 100, 75 L. Ed. — -, Dec. 1, 1930.)

See, also, Hoover-Bond Co. v. Nauts (D. C.) 42 F.(2d) 299.

Were the appellant permitted to file amended returns for the years 1917 and 1918, the amended return -for 1919 would have been in striet accordance with the determination of the Commissioner, so that the difficulty with which it finds itself confronted arises from the fact that the right to file amended returns, or claim refunds, for the years prior to 1919, was barred by the statute of limitations. Manifestly, the amended return for 1919, as filed, did not conform to the straight accrual basis or to the installment plan, and did not reflect the true income of the taxpayer for that year. In effect, the appellant is attempting to claim credit in 1919 for taxes paid in prior years, in the face of the fact that a direct claim for a refund of such prior taxes is barred by the statute of limitations. Had the change from the straight accrual basis to the installment plan been mandatory, it might well be urged that Congress did not intend to impose a double tax. But it was optional with the government to allow the change, and optional with the taxpayer to accept it; and, when the appellant exercised that option, and filed the amended return, it accepted the change with the burden imposed, so that the question of double taxation does not arise. The question may not be entirely free from doubt or difficulty, but we think it was correctly determined in the cases to which we have referred.

Nor do we see any special merit in the contention that the tax of 1919 was imposed on invested capital, rather than on income. When the appellant exercised the option, granted by the government and filed the amended return, the amended return became in effect an original return, and it can hardly be said that income actually received during the year 1919 was invested capital at the beginning of that year.

It is finally contended that the appellant was at least entitled to recover the amount of the refund as determined by the Commissioner. But the Commissioner likewise determined that the amount of the refund should or would be applied or credited on claimed deficiencies for other years. In so doing the Commissioner acted within his authority, even though the ámount of the deficiencies had not yet been ascertained. To hold otherwise would entitle the appellant to interest on the amount of the refund while the government would receive no interest on the deficiencies which might equal or exceed the refund. McCarl v. U. S. ex rel. Leland, 59 App. D. C. 362, 42 F.(2d) 346. It was conceded on the argument that this question is of little moment because the government would in no event pay the refund, even if reduced to judgment, until the amount of the deficiencies was aseertainéd and determined. Eor this reason, the action to recover the refund was prematurely brought.

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


text:
    UNITED STATES v. STAMEY et al. (two cases).
    No. 6232.
    Circuit Court of Appeals, Ninth Circuit.
    March 16, 1931.

      See also 37 F.(2d) 188.
    Anthony Savage, U. S. Atty., and Tom De Wolfe, Asst. U. S. Atty., both of Seattle, Wash., and James T. Brady, Acting Gen. Counsel, and Bayless L. Guffy, Atty., U. S. Veterans’ Bureau, both of Washington, D. C., and Lester E. Pope, Atty., U. S. Veterans’ Bureau, of Seattle, Wash., for the United States.
    L. B. Schwellenbach, Ivan Merrick, and George Flood, all of Seattle, Wash., for appellees and cross-appellants.
    Before BUDKIN, WILBUR, and SAWTELLE, Circuit Judges.
   RUDKIN, Circuit Judge.

This is an appeal from a judgment in favor of the plaintiffs in an action on a policy of war risk insurance. Error is assigned in the admission of testimony, in the refusal of the court to direct a verdict for the appellant at the close of all the testimony, and in the charge of the court to the jury.

Grady G. Stamey, the insured, enlisted in the military service of the United States on April 28, 1918; went overseas August 31, 1918; contracted influenza, in France, in October, 1918, and was on sick leave for about a week; had a violent attack of coughing in March, 1919, was transferred to hospital in April, 1919, where condition of pericarditis was found to exist; did not thereafter return to active duty; and was finally discharged on July 19, 1919. After his discharge, the testimony tends to show that he was pale and very nervous; tired and unable to sleep; spasmodic in eating, sometimes very hungry, sometimes eating very little; had periodical spells of restlessness and suffered at night; had severe pains in the chest and head and was feverish and ill, remaining in bed the greater part of the time until August 1,1919. On the latter date, and again on August 30, 1919, he was treated by a physician for pericarditis. At that time both lungs were affected, and, in the opinion of the attending physician, tuberculosis was fairly well advanced. Between September 1 and November 20, 1919, he was employed for about two months as an elevator operator, and in the Quartermaster’s Corps at Seattle. He was unable to continue his work longer, and from the latter part of November, 1919, until March, 1920, was confined in the hospital at Palo Alto, Cal. After his return from the hospital he attended school for the balance of the year, somewhat intermittently, but was unable to work, and during the last six months of his life was continuously confined to his bed.

In addition to the foregoing, numerous reports of . examinations of the deceased, made by doctors in the employ of the United States Veterans’ Bureau, were admitted in evidence, over objection. These reports contain many repetitions, but, speaking generally, one or more of them disclosed tuberculosis, chronic, pulmonary, incipient; another, tuberculosis, moderately advanced, probably active, slightly progressive; others, tuberculosis, chronic, pulmonary, arrested, or apparently arrested. Some of the reports disclosed that the deceased was unable to resume his former occupation, that of assistant to surveyor, and the physician advised against it, while others disclosed that he was able to resume his former occupation and the physician advised that he do so. Some disclosed that his vocational handicap was major, while others reported it as minor, and the reports generally disclosed that the prognosis was favorable.

As already stated, the records of the Veterans’ Bureau were admitted in evidence over objection and exception, and the ruling of the court was assigned as error. Whatever argument might be urged against the admissibility of sueh records, as an original proposition, we feel constrained to follow the unanimous rulings in the different circuits which fully sustain the ruling of the eourt below. United States v. Worley (C. C. A.) 42 F.(2d) 197; Runkle v. United States (C. C. A.) 42 F. (2d) 804; United States v. Cole (C. C. A.) 45 F.(2d) 339. We will add, however, that the objection was a general one, and we are not called upon to consider whether the whole records were admissible, or whether the eourt should only have received sueh parts as contain material, specific findings of fact. United States v. Cole, supra.

We deem it unnecessary to discuss the question of the sufficiency of the testimony to warrant the submission of the case to the jury, further than to say that the testimony was ample, if believed by the jury, to sustain a finding of permanent and total disability. Indeed, inasmuch as the testimony on the part of the plaintiffs was uneontradieted, it would be a, matter of surprise if the jury had reached a different conclusion.

Nor do we find any merit in the objection, or exception, to the charge of the court relating to the effect to be given to statements made by the insured in his application for a conversion of a part of his insurance.

As an affirmative defense the answer averred that on August 7, 1919, the insured converted $4,000 of his $10,000 term insurance into an ordinary life poliey, which was later permitted to lapse for nonpayment of premiums. By reason of this affirmative defense, which was not controverted, the court below limited the recovery to the payments or installments due on the $6,000 of the original poliey which had not been converted, and by a cross-appeal on the part of the plaintiffs this ruling is assigned as error. July 3,1930, some months after the trial, section 307 of the World War Veterans’ Act was retroactively amended so as to provide:

“That the insured under sueh contract or poliey may, without prejudicing his rights, elect to make claim to the bureau or to bring suit under section 445 of this title on any prior contract or poliey, and if found entitled thereto, shall, upon surrender of any subsequent contract or policy, be entitled to payments under the-prior contract or poliey.” 38 USCA § 518.

In view of this amendment the government concedes that the affirmative defense set forth in the answer is no longer available, so thti we need only consider whether this court should direct the entry of a proper judgment or whether the case must be remanded for a new trial. By their verdiet the jury found in favor of the plaintiffs and fixed the date of permanent and total disability as of July 31, 1919, within the life of the policy. This, we understand, is the usual form of verdiet in this class of cases, and the court computes the amount due and renders judgment accordingly. The verdiet or finding of the jury was a special one, covering every controverted issue in the ease, and in sueh eases it is the duty of the appellate court, on reversal, to direet the entry of the proper judgment. Fort Scott v. Hickman, 112 U. S. 150, 165, 5 S. Ct. 56, 28 L. Ed. 636.

The judgment of the court below is therefore vacated, and the ease is remanded to that eourt with instructions to enter judgment on the verdiet in accordance with the views herein expressed, upon surrender of the converted poliey described in the affirmative defense.

In view of the fact that the reversal is made necessary by a statute enacted since the entry of the judgment in the court below, no costs will be allowed to either party in this court.