author: HUNT, Circuit Judge. GILBERT, Circuit Judge

text:
    HEITMAN v. UNITED STATES.
    (Circuit Court of Appeals, Ninth Circuit.
    May 25, 1925.)
    No. 4393.
    1. Indictment and information ¡§=>175 — Where place is necessary part of description of offense, it must be proved as laid.
    Where offense has no essential connection with place where committed, though charged to have been committed in particular location, it may be proved to have been committed anywhere within jurisdiction, though where charge is for offense local in nature, as lareény, burglary, or nuisance, allegation of place is necessary part of description of offense, and must be proved as laid.
    2. Criminal law <§=>346 — Indictment and Information ¡§=>175 — Place of maintenance of liquor nuisance must be proved as laid.
    Under National Prohibition Act, tit. 2, § 21 (Comp. St. Ann. Supp. 1923, § 10138%jj), where information charged maintenance of liquor nuisance at particular place, it was necessary for government to prove maintenance at that place, and defendant had right to introduce testimony to pr'ove that place described in information was not where alleged offense was committed.
    3. Criminal law ¡§=5369(6) — In prosecution for maintenance of liquor nuisance, evidence fending to show defendant’s implication in prior attempt to violate prohibition law held improperly admitted.
    In prosecution for maintenance of liquor nuisance, it was error to permit state’s witness to testify that on prior occasion he, with others, had found defendant and another repairing barn for operation of illicit distillery.
    4. Criminal law ¡§=>1169(2) — Guilt of maintenance of liquor nuisance held not so clearly established as to render receipt of incompetent evidence nonprejudiciai.
    Guilt of maintenance of liquor nuisance held not so clearly established as to render receipt of incompetent evidence nonprejudiciai.
    Gilbert, Circuit Judge, dissenting.
    In Error to the District Court of the United States for the Southern Division of the Northern District of California; John S. Partridge, Judge.
    Henry Heitman was convicted of maintaining liquor nuisance, and he brings error.
    Reversed and remanded.
    Edward A. O’Dea, of San Francisco, Cal., for plaintiff in error.
    Sterling Carr, U. S. Atty., and T. J. Sheridan, Asst. U. S. Atty., both of San Francisco, Cal.
    Before GILBERT, HUNT, and RUDKIN, Circuit Judges.
   HUNT, Circuit Judge.

Heitman was convicted under an information charging, in count 1, that he maintained a common nuisance on or about June 4, 1923, at 950 Hampshire street, San Francisco, and, in count 2 that, at the above-described place he possessed certain intoxicating liquor, and, in count 3, that at the same time and place he had in his possession certain property designed for the manufacture of intoxicating liquor.

There was testimony on behalf of the government that a still and a quantity of liquor, described in the information, were found in a loft of a building at 950 Hampshire street, San Francisco, and that defendant had been seen entering the building in which the liquor and still were found, although he was not there when arrested. One of the witnesses for the prosecution testified that he rented the upper floor of the building in which the liquor and still were found to one Harris; that the premises were at 590 Hampshire street, San Francisco. Defendant introduced testimony to the effect that 950 Hampshire street was three or four blocks away from 590 Hampshire street, and that the paint shop with the loft upstairs, which had been described by the witness, was at 590 Hampshire street, but, on motion of the prosecuting attorney, all that testimony was stricken out as immaterial. Defendant excepted. In his own behalf defendant testified that he was arrested at 590 Hampshire street and not at 950; that he did not own the property designed for the manufacture of liquor or the liquor; that he did not know of the manufacture of liquor; that he went to visit a friend in the office at 590 Hampshire street; but that the office was not in the place where the still was found.

The court instructed the jury that, while there appeared to be a discrepancy in the number of the street at which the still was found, the jury was not to consider that. “The question,” said the court, “as to whether or not it was 950 or 590 is of no concern in this case whatsoever, if you find that a still was actually found there.” Upon that theory the court refused defendant’s request to charge that, if it were found from the evidence that liquor was not kept for sale at 950 Hampshire street in San Francisco, then defendant must be acquitted of the charge of maintaining a common nuisance in violation of section 21, tit. 2, of the National Prohibition Act (Comp. St. Ann. Supp. 1923, § 10138%jj). Exception was saved.

Section 21, tit. 2, of the National Prohibition Act, provides that any room, house, or place where intoxicating liquor is manufactured, sold, kept, or bartered, in violation of title 2, and all intoxicating liquor and property kept and used in maintaining the same, are declared to be a common nuisance, and any person convicted of maintaining a common nuisance shall be fined, etc.

The better rule is that an offense which has no essential connection with the place in which it is committed, although charged to have been committed in a particular location, may be proved to have been committed anywhere within the jurisdiction, but that, where the charge is for an offense in its nature local, as in cases of larceny in a building, burglary, or nuisance, the allegation of the place is necessary part of the description of the offense, and must be proved as laid. Commonwealth v. Heffron, 102 Mass. 148; Wertz v. State, 42 Ind. 161; People v. Slater, 5 Hill (N. Y.) 401.

In State v. O’Neal, 19 N. D. 426, 124 N. W. 68, defendant was indicted for keeping and maintaining a common nuisance, contrary to the provisions of the state prohibition law. The place was particularly described, but the evidence showed that it was committed on a different subdivision of land from that set forth in the information. The court referred to the generally commended rule that, in charging the keeping and maintaining of a common nuisance, the proof must conform to the allegation, and said that “this is- the rule, although it was not necessary to describe the place with particularity in the first instance.” State v. Kelly, 22 N. D. 5, 132 N. W. 223, Ann. Cas. 1913E, 974; Bishop’s Criminal Procedure, § 485.

In Hattner v. United States (C. C. A.) 293 F. 381, where defendant was charged with maintaining a common nuisance at 2057 North Fourteenth street in Toledo, Ohio, and the evidence showed that the nuisance was maintained at a certain number on another street in Toledo, the court held that the facts necessary to conviction under the one charge would not support conviction under the other, and that a man cannot be said to he guilty of maintaining a nuisance in one place, because the evidence tends to show he is guilty of committing precisely the same kind of nuisance in another place.

We therefore hold that, inasmuch as the information against Heitman specifically described the place where the alleged nuisance was maintained, it was incumbent upon the prosecution to prove that the alleged nuisance was maintained at that place. It follows that defendant had a right to introduce evidence tending to prove that the place described in the information was not where the alleged offense was committed, and that the court was in error in striking out the testimony heretofore referred to, and in refusing to instruct as requested by defendant.

We now turn to questions arising out of the conviction under counts 2 and 3.

A witness for the government, after testifying that he knew the defendant, was asked whether he ever had had occasion to arrest defendant. Counsel for defendant objected on the ground of incompetency, and stated that if there were any records which could be produced they should be. The court overruled the objection, and exception was preserved. The witness answered that he had had occasion to arrest defendant at a place called Yallimar. The prosecuting ■ attorney then asked what defendant was doing there at that time. Objection was overruled, and exception was preserved. Witness said that at the time in Yallimar defendant was in a bam with another man who had also been arrested; that they were there tacking up black paper around the bam, “and were preparing to operate an illicit distillery; they had a large tub there in the center; evidently it was for a worm tap; there was no worm there, and no still at that time.” Witness said that the defendant and the other man came out of the bam and laughed at them, saying, “You fellows are just about a week ahead of time.” Question was then asked by defendant’s counsel whether or not defendant had been convicted in that matter, to which witness replied that he-had not, and had not been arrested. Counsel for defendant then asked that the testimony be stricken out, but the court overruled the objection, and defendant saved an exception.

The obvious purpose of the prosecution in introducing such evidence was to impress the jury -with the belief that defendant, at some previous time, at another place, was implicated in an attempt to violate the prohibition law. The matter was wholly apart from the issue to be tried, and the tendency of it was to take the minds of the jurors away from the material questions before them, and to give the impression that defendant, by reason of previous criminal acts, was unworthy and therefore probably guilty •of the charge upon which he was being tried. It was clear error to allow the evidence to go to the jury. Jianole v. United States (C. C. A.) 299 F. 496; Beyer v. United States (C. C. A.) 282 F. 225; Souza v. United States, 5 F.(2d) 9, April 27, 1925.

Nor is the case one where the guilt of the defendant, of the particular crime charged, was so clearly established that the court can say the error was not prejudicial. Defendant was entitled to be tried upon competent evidence, .and only for the offense charged.

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

GILBERT, Circuit Judge

(dissenting). I agree that there was failure to sustain the count which charged the maintenance of a nuisance. I cannot agree, however, that the judgment on the other counts should be reversed. The officers took possession of the premises on which there was in operation a large still, supplied with an abundant quantity of material for the manufacture of moonshine whisky. Prior to that timé the plaintiff in error had been under observation, and on several occasions had been followed by one of the officers to the premises upon which the still was operated. While the officers were in possession of the premises, they arrested the plaintiff in error under the following circumstances: They had taken in charge the man who, as manager, was conducting the distilling operations. The plaintiff in error approached, and the manager said to the officers: “Here is one of them.” The officer replied: “Who operates the still?” And he said: “Yes.” “All right, Mr. Heitman,” the officer said, “you are under arrest.”- The plaintiff in error said: “Can’t we fix it up ?” And a little later he said again: “Can’t we fix it up, fellow, I am in a jam.” He made no response to the statement of the manager, made in his presence, that he was one of the men engaged in operating the still. And when testifying on his own behalf he made no denial of any of the items of the evidence above set forth. That evidence, I submit, was ample to prove the charge.

But it is held by the majority of the court that the judgment should be reversed because testimony was erroneously admitted that, on a prior occasion, the plaintiff in error and another were seen in an old bam in a canyon, tacking up black building paper around the walls, and preparing to operate an illicit distillery. “They had,” said the witness, “a large tub there in the center. Evidently it was for a worm- tap. * * * They came out, and laughed at us, and said, ‘You fellows are just about a week ahead of time.’ ” Where the other evidence, as in this case, clearly establishes the guilt of the accused, I can see no justification for setting aside the judgment obtained thereunder, merely because of the erroneous admission of evidence of the prior activities of the accused in the line of illicit distilling, and I submit that to do so is to exalt unduly a mere technicality. In a similar ease, Judge Rogers said: “The objections of the defendant must be serious and clearly prejudicial to justify the court in reversing the judgment and compelling the government to put this man again on his trial.” Fitter v. United States, 258 F. 567, 169 C. C. A. 507. Other eases in point are Forni v. United States (C. C. A.) 3 F.(2d) 354; Raine v. United States (C. C. A.) 299 F. 407; Simmons v. United States (C. C. A.) 300 F. 321; Savage v. United States (C. C. A.) 295 F. 686; Jones v. United States (C. C. A.) 296 F. 632; Simpson v. United States (C. C. A.) 289 F. 188.


source: Caselaw Access Project

author: ROSS, Circuit Judge

license: Public Domain

text:
    ELLAMAR MINING CO. v. ALASKA S. S. CO.
    (Circuit Court of Appeals, Ninth Circuit.
    May 25, 1925.
    Rehearing Denied June 29, 1925.)
    No. 4390.
    1. Shipping <@=>104 — Contract for carriage held terminated by requisitioning of carrier’s vessels.
    A contract, made in 1913, by a shipowner to carry the ore from a copper mine to the smelter for a term of five years, held\ terminated try the requisitioning of the carrier’s vessels by the government for war purposes before expiration of the term.
    2. Shipping <@=>104 — Continuing contract of' carriage, not disapproved by Shipping Board, held valid.
    The provision of Shipping Board Act Sept. 7, 1916, § 15 (Comp. St. § 8146h), that “agreements existing at the time of the organization of the board shall be lawful until disapproved by the board,” held¡ to apply to a continuing contract for carriage between a carrier and shipper.
    In Error and Cross-Error to the District Court of the United States for the Northern Division of the Western District of Wash7 ington; Jeremiah Neterer, Judge.
    Action at law by the Ellamar Mining Company against the Alaska Steamship Company. Judgment for plaintiff, and both parties bring error.
    Affirmed.
    These are cross-writs of error. The basis of the action, which was for damages, brought by the mining company against the steamship company, was a contract entered into between those parties in September, 1913, by means of an offer in writing made by the steamship company to the mining company and its acceptance by the latter. The mining ‘ company was operating a mine at Ellamar, Alaska, and was shipping its ore to the Tacoma smelter, at Tacoma, Wash., with which smelter it had a contract concerning such shipments. The steamship company’s offer, which, as has been said, became the contract between it and the mining company by yirtue of the acceptance of the- 'offer, is as follows:
    “Alaska Steamship Company.
    “Seattle, Washington, September 25,1913.
    “B. W. Baxter, Yice President, Ellamar Mining Company, Seattle, Washington— Dear Sirs: (1) Beferring to your supplies to Ellamar and output of ore from Ellamar to Tacoma:
    “(2) We hereby offer these arrangements for your acceptance, and, if in accordance with your understanding, will you please sign one copy of this letter and return for our file ?
    “(3) It is understood and agreed that in making your shipment of supplies "and equipment to Ellamar, you will favor the Alaska Steamship Company, and ’ route all of your shipments by steamers of this company as far as you possibly can, arranging as far as possible to place your orders for forwarding supplies on the freight steamers which axe to call at Ellamar for ore, such shipments to take current tariff rates.
    “(4) It is understood and agreed that you will ship your entire output of ore from El-lamar by steamers of the Alaska Steamship Company. It is understood that at the present time your output is about 3,000 tons per month, but the location of your ore bunkers and the depth of water are such that our passenger steamers cannot get to the bunkers, and cargo steamers can get in and out with only part of a cargo. It is therefore understood that, while we shall have the handling of your entire output, and that we will make every effort to move same with our own steamers, it is further understood that we shall have the privilege of calling on other lines, if necessary, but that no shipments ■will be made by steamers other than those of the Alaska Steamship Company, except under arrangements through this company:
    “(5) Provided, however, in ease at any time during the life of this agreement the Alaska Steamship Company shall be unable to or does not handle your ore without unreasonable delay, it is understood and agreed that during such period of disability or failure on our part you will be at liberty to forward your ore by some other means.
    “(6) In case of shipwreck, detention by wreck, or Such similar causes, we are unable to handle your entire output with our own ships, we agree to handle 'it with other ships, if it is possible to secure them.
    “(7) It is further understood that you expect, on or about January 1, 1914, to increase your output to 5;000 tons per month, and that you will at once proceed to increase your facilities, and construct a tramway across the reef into deep water, and provide bunkers which will carry 2,500 to 3,000 tons of ore, and place yourselves in a position to deliver us full cargoes from bunkers located at a point accessible to any of our steamers, constructing your bunkers in such a way that ships can take full cargoes at any stage of tide at rate' of not less than 100 tons per hour.
    “(8) It is understood that, while handling ore-from your present bunkers before completion of your wire tramway, we will make every effort to move the ore without delay or inconvenience to you, and that after you construct your tramway to deep water, and are in position to deliver full cargoes to any of our ships, we will, subject to the provisions of paragraph No. 6 hereof, move your entire output of 5,000 tons of ore per month without any delay to your mining operations, excepting as may be caused by strikes, shipwrecks, detention by wreck, or weather conditions, or such similar causes beyond our control.
    “(9) The rate for handling the ore to be $2.50 per ton of 2,000 pounds.
    “(10) This agreement will continue in effect for a period of five years from date hereof, or for so much of said period after January 1, 1914, as you are prepared to profitably move or ship 5,000 tons of ore per month. In ease you.find it unprofitable, or for any other reason you do not produce 5,-000 tons of ore per month, but carry on your operations, producing and shipping a smaller quantity per month, it is agreed that we shall be given and shall furnish the carriage of such smaller quantity of ore under the terms of this agreement.
    “Yours truly,
    “Alaska Steamship Company,
    “By R. W. Baxter, Vice President.
    “Accepted:
    “Ellamar Mining Company,
    “By E. M. Jordan, President.”
    The amended complaint of the plaintiff alleged that its contract with the smelting company required the latter to purchase all of the ore' and concentrates of' the mine containing 1 per cent, or more of copper for a period of five years from January 1, 1914, up to a maximum tonnage of 5,000 tons per month — a copy of the contract being attached to the amended complaint. The latter also alleged in effect that during the term of the contract it was economically impracticable for the plaintiff to secure other means than the ships of the steamship company with which to transport its ore to Tacoma, and impossible to ship such ore to that place by any other means; that the defendant steamship company knew of the contract between the plaintiff and the smelting company, and that the contract in question was made with reference thereto. The amended complaint also alleged that the plaintiff complied with subdivision 7 of the contract in question, and that during the years 1916, 1917, and up to September 25, 1918, the plaintiff operated its mine and shipped the ores therefrom in certain stated amounts; that during the year 1916 the plaintiff mined and shipped on defendant’s vessels to the Tacoma Smelting Company, at Tacoma, Wash., 43,000 tons of its ore, but could and would have mined for shipment and have shipped to said Tacoma Smelting Company at Tacoma 12,000 additional tons of such ore, if the defendant had furnished carriage for it, which the defendant failed to do, whereby the plaintiff lost $91,800.
    The amended complaint further alleged that during the year 1917 the plaintiff mined 55,000 tons of ore, all of which the defendant carried, and that during and up to September 25 of the year 1918 the plaintiff mined 33,925 tons of ore, of which the defendant carried 24,245 tons only, whereby the plaintiff lost $52,272, and the further sum of $4,840, by reason of rehandling those 9,-680 tons, and that the plaintiff could and would have mined and had ready for shipment, during the first 8% months’ period of 1918, 10,241 tons of ore additional to that actually mined, if the defendant had furnished the plaintiff shipping facilities therefor, whereby the plaintiff lost $10,241 'on account of such 10,241 tons not mined. The amended complaint further alleged that upon the termination of the plaintiff’s contract of shipment with the defendant, on, to wit, September 25, 1918, and upon the termination of its contract with the Tacoma Smelting Company for the purchase of its ore, by reason of the depreciation of the market value of copper and of the other ores derived from the said mine, and by reason of the increased cost of smelting said ore and the increased cost of shipping the same from Ellamar to a point where it could be marketed, the operation of the mine became wholly unprofitable, and the plaintiff operated the same at a loss until the middle of January, 1920, when it was wholly abandoned. It was further alleged that until it was so abandoned the plaintiff had therein ore to the amount and of the grade sufficient to make the additional shipments of the values alleged, which additional ore the smelting company was bound and willing to purchase.
    The prayer was for damages in the sum of $150,153, with interest thereon from September 25, 1918. As the complaint affirmatively shows that all the ore mined by the plaintiff during the year 1917 was transported by the defendant to the smelter, no further reference need be made to the operations during that year.

      As’affirmative defenses to thé plaintiff’s allegations covering the year 1916 and that portion of 1918 to September 25, the defendant steamship company set up, among other things:
    (1) That at the time of the making of the contract in question the defendant was a common carrier of freight and passengers by steamships between Tacoma and Seattle, Wash., and various ports and places in the territory of Alaska. That one of the regular routes upon which it so operated a portion only of its vessels was between Seattle and Tacoma, Wash., and Cordova, ■ Ellamar, Valdez, Seward, and Anchorage, in southwestern Alaska, Ellamar being a regular port of call for the defendant’s vessels. That upon the said route there were located at the time many mines, salmon canneries, and other large manufacturing plants and business establishments, as well as large cities and communities, all of which depended to a large extent upon the defendant’s vessels to carry their products and their supplies. That prior to the making of the contract in question, to wit, on or about August 30, 1915, one of the defendant’s largest freight-carrying vessels so used upon such route, Edith by name, was wholly lost through perils of the sea, and on or about November 18, 1917, after the making of the contract, another of its vessels, called the Mariposa, used in carrying ore for the plaintiff, was also wholly lost through a similar peril. That the loss of such vessels made it impossible for the defendant to carry all of the plaintiff’s ore in 1916, 1917, and 1918, in its own vessels, and that it was impossible for the defendant during said time to secure other vessels sufficient to enable it to carry 5,000 tons of ore per month, but alleges that it did carry or cause to be carried all ore mined by the plaintiff and offered for shipment during all of those years up to and including September 25, 1918, either in its own vessels or in other vessels furnished by it. That during 1916 it carried 35,250.36 tons of such ore in its own vessels and 8,713.77 tons for the plaintiff in other vessels furnished by the defendant, being the entire amount of ore mined or offered to the defendant by the plaintiff for shipment during the year 1916. That during the year 1918, prior to September 25 thereof, all ore mined by .the plaintiff and offered for shipment was carried in vessels owned by the defendant and operated by it either as owner or agent. That after the enactment by Congress of its Shipping Act, approved September 7, 1916, pursuant to its provisions and requirements, the defendant duly established rates, charges, and classifications for the carriage of freight, ineluding ore, between Ellamar, Alaska, and Seattle and Tacoma, Wash., and duly issued and filed with the United States Shipping Board its through and local freight tariff, naming commodity rates between Tacoma and Seattle, Wash., and Unalaska, Alaska, and intermediate points, which tariff was designated and known as “Supplement No. 4 to Tariff No. 262,” effective January 1, 1917. That in and by said tariff there was duly established and fixed a lawful freight rate on ore such as was mined and shipped by the plaintiff and referred to in the contract in question, between Ellamar, Alaska, and Tacoma smelter wharf, Tacoma. That at all times subsequent to the filing and taking effect of that tariff the same was binding upon both plaintiff and defendant, and that all ore carried by the defendant for the plaintiff was under and pursuant thereto, and not otherwise, and that no ore was thereafter carried by the defendant for the plaintiff under or by virtue of the contract in suit.
    (2) The commencement and existence of the World War, into which the United States entered, and of which the courts, also, of course, take judicial notice. That during all times during that war the United States Shipping Board, subsequent to its creation, had the power to requisition American vessels, and between October 17 and November 25,1917, duly requisitioned and took over all of the defendant’s vessels having a carrying capacity of 2,500 tons or over, being all of its vessels except the Henry T. Scott, then employed on the Atlantic Coast, which was also so requisitioned and taken over April 2, 1916, and except, -also, five small vessels, of less than 2,500 tons capacity, which were not operated on the route above mentioned, and were either unfit or incapable of carrying plaintiff’s ore. That, upon the requisitioning of the said vessels by the United' States Shipping Board, the same were operated by it for and on behalf of the United States government, the defendant acting merely as agent for the Shipping Board in the operation of some of the said vessels until subsequently released by it to the defendant. That the said vessels were so requisitioned and taken over by the Shipping Board for an indefinite, undetermined length of time, by reason of which the defendant was wholly prevented from performing the contract in question, which was thereby wholly frustrated without fault on the part of the defendant.

      By its answer the defendant to the action also set up certain counterclaims against the plaintiff, the validity of which were admitted by the plaintiff. By its instructions the trial court took from the jury the consideration of any damage alleged to have been sustained by the plaintiff during the year 1918, and submitted to it the question of damages alleged to have been sustained by the defendant’s alleged breach .of the contract during 1916, which amount the jury by its verdict fixed at $12,250, after deducting the amount admitted to be due the defendant from the plaintiff on the counterclaims. Judgment followed accordingly.
    Peters & Powell and George E. de Steig-uer, all of Seattle, Wash., for plaintiff in error and cross-defendant in error.
    W. H. Bogle, Lawrence Bogle, P. T. Merritt, and Lane Summers, all of Seattle, Wash., for defendant in error and cross-plaintiff in error.
    Before GILBERT, ROSS, and RUDKIN, Circuit Judges.
   ROSS, Circuit Judge

(after stating the facts as above). An unusually large number of decisions are cited on behalf of both parties to the controversy, to review which would be quite impossible in an opinion of any reasonable length; nor do we think it at all necessary to do so, being of the opinion that the correctness of the ruling of the court below, to the effect that the contract between the parties was terminated by the taking over of the ships of the defendant company under the requisition by. the government, is sufficiently shown by these declarations of the Supreme Court in the case of Texas Co. v. Hogarth Shipping Co., 256 U. S. 619, 629, 630, 631, 41 S. Ct. 612, 614 (65 L. Ed. 1123):

“It long has been settled in the English courts, and in those of this country, federal and state, that where parties enter into a contract on the assumption that some particular thing essential to its performance will continue to exist and be available for the purpose, and neither agrees to be responsible for its continued existence and availability, the contract must be regarded as subject to an implied condition that, if before the time for performance and without the’ default of either party the particular thing ceases to exist or be available for the purpose, the contract shall be dissolved and the parties excused from performing it. Taylor v. Caldwell, 3 Best & Smith, 826, 839; In re Shipton, Anderson & Co., [1915] 3 K. B. 676; Horlock v. Beal, [1916] 1 A. C. 486, 494, 496, 512; Bank Line, Ltd., v. Arthur Capel & Co., [1919] A. C. 435, 445; The Tornado, 108 U. S. 342, 349-351; Chicago, Milwaukee & St. Paul Ry. Co. v. Hoyt, 149 U. S. 1, 14, 15; Wells v. Calnan, 107 Mass. 514; Butterfield v. Byron, 153 Mass. 517; Dexter v. Norton, 47 N. Y. 62; Clarksville Land Co. v. Harriman, 68 N. H. 374; Emerich Co. v. Siegel, Cooper & Co., 237 Ill. 610. The principle underlying the rule is widely recognized and applied to various classes of contracts. The Kronprinzessin Cecilie, 244 U. S. 12, 22-24. But, of course, it does not apply where the risk is fully covered by a term of the contract, nor where performance is not practically cut off, but only rendered more difficult or costly. Columbus Railway, Power & Light Co. v. Columbus, 249 U. S. 399, 410 et seq. Perhaps the oldest and most familiar application of the principle is to contracts for personal service, where performance is prevented by death or illness. Robinson v. Davison (1871) L. R. 6 Exch. 269; Spalding v. Ross, 71 N. Y. 40.

“Another application widely recognized is where a ship chartered for a voyage, after the date of the charter party and before the time for the voyage, is accidentally destroyed by fire, lost at sea, or injured in such degree as not to be available for the service. The Tornado, supra, was a suit on a contract of affreightment, where the ship, before beginning the voyage, was accidentally burned and thereby prevented from undertaking it. This court held that the contract was dissolved, saying (page 349): ‘We are of opinion that, by the disaster which occurred before the ship had broken ground or commenced to earn freight, the circumstances with reference to which the contract of af-freightment was entered into were so altered by the supervening of occurrences which it cannot be intended were within the contemplation of the parties in entering into the contract, that the shipper and the underwriters were absolved from all liability under the contract of affreightment. The contract had reference to a particular ship, to be in existence as a seaworthy vessel and capable of carrying cargo and earning freight and of entering on the voyage. All the fundamental conditions forming part of the contract of the shipowner were wanting at the time when the earning of freight could commence.’

“Here the ship, although still in existence and entirely seaworthy, was rendered unavailable for the performance of the charter party by the requisition. By that supervening act she was impressed into the war service of the British government for a period likely to extend — and which as it turned out did extend — long beyond the time for the charter voyage. In’ other words, compliance with the charter party was made impossible by an act of state, the charterer was prevented from having the service of the ship and the owner from earning the stipulated freight. The event apparently was not anticipated and there was no provision casting the risk on either party. Both assumed that the ship would remain available, and that was the basis of their mutual engagements. These, we think, must be regarded as entered into on an implied condition that, if before the time for the voyage the ship was rendered unavailable by such a supervening act as the requisition, the contract should be at an end and the parties absolved from liability under it.

■ “That the charter party was entered into in this country is not material. The important consideration is that it became impossible of performance through a supervening act of state, which operated directly on the ship and the parties could not avoid.”

The contract between the parties was,therefore, terminated upon the taking over of the ships under their requisition by the government.

It is insisted, however, on the part of the plaintiff in error steamship company, that the contract was rendered absolutely void by the provisions of the Shipping Act of September 7, 1916. The conclusive answer to the argument made in that behalf is that the steamship company neither alleged nor proved that the contract, which admit.tedly was in existence at the time of the passage of that act, was disapproved by the Shipping Board. In its section 15, the Act of September 7, 1916 (39 Stat. 734 [Comp. St. § 8146h]), expressly declares: “Agreements existing at the time of the organization of the board shall be lawful until disapproved by the board. It shall be unlawful to carry out any agreement or any portion thereof disapproved by the board.”

It is contended that section 15 refers only to such agreements as are by the statute required to be filed with the board, and that the statute contains no requirement that any contract between a carrier and a shipper be so filed, this being the reasoning of counsel:

“We think the court overlooked the fact that section 15 of the act relied upon by plaintiff requires the filing with the Shipping Board of copies of contracts between ‘every common carrier by water, or other person subject to this act,’ and ‘any other such carrier or other person subject to this act.’ The act expressly defines who are persons subject to the act, and these do not include shippers. Therefore there is no requirement that a contract between a carrier and a shipper should be filed with the Shipping Board. It seems to us clear that this entire section refers solely to agreements required to be filed, and we fail.to understand how the act can be construed as making contracts valid until disapproved by the Shipping Board when such contracts are not required, nor even permitted, to be filed with that board. How could the board approve or disapprove a contract of which it knew nothing? If a carrier, when accused of discrimination in violation of the other provisions of the Shipping Act, could completely exonerate itself by showing that it had an undisclosed existing contract which had never been filed with, known to, or disapproved by the Shipping Board, certainly the entire purpose of the act would be defeated.”

We are unable to see any merit in that reasoning. There is, in our opinion, no mistaking the meaning of the language of the statute, expressly declaring that “agreements existing at the time of the organization of the board shall be lawful until disapproved by the board.” To hold that shippers through carriers by water are “not subject ’to the act” is wholly inadmissible. The record shows that on the trial evidence was given tending to show that the plaintiff mining company could and would have mined and shipped from its mine during the year 1916 ore up to the average of 5,000 tons per month for the entire year, but for the irregularity and infrequency of the calling of the defendant’s ships at Ellamar, contrary to the requirements of the contract, in consequence of which the plaintiff company was prevented from shipping the maximum tonnage during 1916 provided for by the contract, which it could and would have done at a profit, but for the steamship company’s-default, and which ore subsequently became ‘ unprofitable to ship, and therefore to mine. Such evidence was the basis of the verdict that was returned in the plaintiff’s favor, and we are unable to hold that it was insufficient.

The judgment is affirmed; neither party to recover costs of this court.


author: ROSS, Circuit Judge.

text:
    BROWN et al. v. PORTNEUF-MARSH VALLEY IRR. CO. et al.
    (Circuit Court of Appeals, Ninth Circuit.
    May 25, 1925.)
    No. 4405.
    1. Waters and water courses <§=222 — Statutory provisions are part of all contracts under Carey Act. ■
    All parties to contracts relating to an irrigation project under the Carey Act (Comp. St. § 4685 et seq.) are bound by all the provisions of the acts of Congress and of the state on the subject.
    2. Waters and water courses <@=258— Lien of construction company under Carey Act fo'r payments due for water rights superior to that of assessments made by operating company.
    C. S. Idaho, § 3019, providing that any person, company, or association furnishing water for any tract of land shall have a first and prior lien on the water right and land on which the water is used for all deferred payments for said water right, inures to the benefit of a company constructing an irrigation system under the Carey Act (Comp. St. § 4685 et seq.), or to bondholders furnishing money for the work, to secure whom it assigned its rights, and such lien held, superior to the lien of assessments made by an operating company for the expense of maintaining and operating the system.
    Appeal from the District Court of the United States for the Eastern Division of the District of Idaho; Frank S. Dietrich, Judge.
    Suit in equity by Henry W. Brown and John R. Chapin, trustees, against the Port-neuf-Marsh Valley Irrigation Company and another. Decree determining priority of liens, from which complainants appeal.
    Modified and affirmed.
    For opinion below, see 299 F. 338.
    John A. Marshall, of Salt Lake City, Utah, and Edwin Snow, of Boise, Idaho, for appellants.
    D. C. McDougall, I. E. McDougall, and H. O. McDougall, all of Pocatello, Idaho, for appellee Portneuf-Marsh Valley Irr. Co.
    Before ROSS, HUNT, and RUDKIN, Circuit Judges,
   ROSS, Circuit Judge.

This is one of a number of similar eases that have heretofore reached and been considered by this court. It grows out of the establishment and construction of an irrigation system in Bannock county, Idaho, under and in pursuance of an act of Congress approved August 18, 1894 (28 Stat. 372, 422), and amendments thereto (Comp. St. § 4685 et seq.), known as the Carey Act, and certain legislation of the state of Idaho. The provisions of the acts of Congress with relation to the subject and certain provisions of the legislation of the state of Idaho will be found set out in the decision of this court in the case of Twin Falls-Salmon River Land & Water Co. et al. v. Caldwell et al., 242 F. 177, 178, 179, 180, 181, 182, 155 C. C. A. 17, and we need not, therefore, take the space to repeat them. The project involved in the present case originally covered about 20,000 acres of land in the vicinity of Downey, in the state of Idaho, that had been set apart by the government by virtue of the act of Congress referred to, and involved the construction of a reservoir at the headwaters of the Portneuf river, and a system of canals by which both the stored water and the natural flow of the stream were to be diverted and applied to the land.

The appellee Portneuf-Marsh Valley Irrigation Company, a corporation, was the construction company, and the appellee Port-neuf-Marsh Valley Canal Company, a corporation, was the operating company, organized by the construction company, with a capital stock of.20,000 shares, to which the whole irrigation system was added, with certain stipulations agreed to by both parties thereto. The acreage contemplated at the beginning of the enterprise was subsequently found to be greater than could be supplied with water, and it was accordingly reduced to 14,000 acres, of which latter area the construction company succeeded in selling water rights for only about 12,240 acres. The operating company, therefore, continued to hold and now holds 1,760 shares of its own stock, representing a proportionate interest in the irrigation system, to build which it became necessary for the construction company to secure money with which to build it, and to do that, it became necessary for it to mortgage the system itself and to pledge certain collateral as additional security for the bonds it issued. The appellants became trustees for such bondholders, and brought' this suit to foreclose the mortgage and the pledged collateral.

The contract between the state of Idaho, through its state board of land commissioners, and the construction company, was entered into June 3, 1908, and provided among other things that the construction company should "sell or cause to be sold to the person or persons filing upon any of the lands herein described, or to the owners of other lands not described herein, but which are or may be susceptible for irrigation from their canal system by good and sufficient contract of sale with, right of possessions- and enjoyment by the purchaser pending its fulfillment, a water right or share in said canal for each and every acre filed upon or purchased from the State or acquired from the United States, or held in private ownership. * * * Such water rights or shares shall be sold to the persons or person aforesaid for lands included in said segregation under the provisions of the ‘Carey Act’ and for lands adjacent thereto, or that can or may be irrigated from said irrigation system when completed, all at a price not to exceed $35 per share, except as is hereinafter provided, the same to be paid for as follows: In cash at time of sale ($3.00) three dollars per share, and the remainder in nine equal annual installments, each bearing the interest at the rate of six per cent. (6%) per an-num, interest payable annually.”

The contract between the state and the construction company also provided as follows: “It being necessary to provide a convenient method of transferring the ownership and control of .said canal and irrigation works from the said party of the second part herein to the purchasers of said water rights in said canal, and for determining their rights among themselves and between said purchasers and the party of the second part herein, and for the purpose of operation and maintaining said canal during the period of construction and afterwards, and fpr the purpose of levying and collecting tolls, charges, and assessments for managing said canal, and for the management and operation thereof, it is hereby provided that, as soon as said lands are ordered thrown open for settlement, a corporation to be known as the Port-neuf-Marsh Valley Company, Limited, shall be formed at the expense of the party of the second part, the articles of incorporation of said company to be approved by the attorney of the state of Idaho; that the authorized capital of said corporation shall be twenty thousand (20,000) shares, which amount is intended to represent one share for each acre of land which may hereafter be irrigated from said canal. All persons, who prior to the formation of such corporation have purchased or acquired water rights of water from said second party for the irrigation of lands embraced in this contract and being then the owners of such rights or shares, shall be entitled to receive and have issued to them, shares in, such corporation so to be formed, equal in number to the water rights or shares of water then owned and held by such persons, and the remainder of the capital stock of such corporation shall be issued to the party of the second part in consideration of the covenants and agreements herein contained in order to enable it to deliver to purchasers of water rights the shares of stock representing the same. Said shares of stock, however, shall have no voting and shall be without force or effect until they have been sold or contracted to be sold to the purchasers of land under said irrigation works.

“At the time of the purchase of any water right after the formation of said corporation, there shall be issued to the purchaser thereof, one share of the capital stock of said corporation for each acre of land entered or filed upon. That the said party of the second part herein shall, in case said water rights or shares of stock are not fully paid for, require the indorsement and delivery to it of said stock, and shall at the same time require of said purchaser an agreement that until thirty-five per cent. (35%) of the purchase price of said stock has been paid, the said party of the second part therein shall vote said stock in such manner as it may deem proper at all meetings of the stockholders of said corporation.”

It further provided, among other things, as follows:

“The right, title and interest of the second party in the said works and irrigation system and in the said lands may be mortgaged, as provided by the said acts of Congress and the laws of the state of Idaho, hereinbefore referred to; the form of such mortgage to be approved by the Attorney General of Idaho. * * *
“It is hereby understood and expressly agreed that this contract is made and entered into by virtue of the provisions and subject to all of the conditions of an act of Congress, commonly known as the ‘Carey Act/ approved August 18, 1894, and- the 'acts amendatory thereto and the laws of the state of Idaho, accepting the terms and provisions of the said ‘Carey Act/ and the contract between the United States and the state of Idaho, segregating from the public domain the lands herein designated as Carey Act lands, and that such laws and contract are as much a part of this contract as if specifically herein set forth.”

The record shows that prior to the sale of the construction company of any of the water rights, its board of directors and stockholders authorized a bond issue in the sum of $300,000, to be secured by a trust deed upon the appropriated water and the irrigation system then being constructed, which instrument provided as follows:

“Before any bonds shall be issued under this instrument there shall be pledged hereunder with Colonial Trust & Savings Bank, one of the trustees, water contracts owned by the company or notes secured by mortgage of deed of trust upon land and water rights thereunto attached (hereinafter called ‘notes’), or cash money, or partly water contracts and partly accrued notes, or cash moneys, aggregating at par one and one-half (1%) times the par value of the installment of bonds of this issue then demanded by the company and issued by the said trustee hereunder. But the said trustee shall require the opinion of counsel, selected by it and paid by the company, to the effect that said water contracts (if water contracts are so deposited) are and constitute direct liens upon real estate capable of being irrigated from the irrigation system of the company, or that said notes (if notes are so deposited) are amply secured by mortgages or trust deeds which are direct liens upon real estate capable of being irrigated from the irrigation system of the company to which lands have been attached water rights sufficient to irrigate, them; and both such land and water shall be subjected to the lien of such mortgage. or deed of trust.”

The record shows that in the year 1915 the irrigation system was completed and accepted by the state of Idaho, prior to which time the right reserved in the contract between the state and the construction company, reserving to the latter the right to vote the settlers’ stock in that company, was by them waived. Upon the completion of the system and its acceptance by the state, a contract was entered into between the' construction company and the canal company, which was ratified by the stockholders of the canal company, and, upon the join{ petition of the two companies, was approved by the state land board of Idaho, subsequent to which time the system was operated by the construction company until .January 1, 1916, when the whole property was conveyed by the construction company to the canal company, since which time the latter has been in possession and control of it.

Pursuant to its obligation to maintain and operate it, and to meet the necessary expense thereof, the canal company, from time to time, pursuant to the provisions of the state contract, the settlers’ contracts, and the bylaws of the operating company, levied assessments upon the stock issued to the settlers, resulting in its sale for delinquency in many instances and its purchase by the canal company at such sales, which stock so purchased, amouriting in the aggregate to 5,495.2 shares, that company claims to own, together with the proportionate beneficial interest thereby represented in the irrigation system, subject to the privilege of redemption under certain circumstances. In some instances the trustees in the present case foreclosed their lien provided for in the contracts upon the land and water stock, and became the purchaser of both the land and the water right represented by the stock, and in other cases acquired the land and water right by deed directly from the settlers without suit.

The appellants sued as successors in interest of the original trustees of the bondholders. The defendant canal company claimed, both by its pleading and in evidence, that in maintaining and operating the irrigation system, and in distributing its waters, it had levied each year upon its stockholders certain assessments upon the stock, and that in many instances the assessments were not paid and that such stock was sold for such nonpayment and acquired by the canal company. The real controversy between the respective parties is the relative priority of lien upon the water stock and the proportionate interest in the irrigation system represented by it. The decree appealed from awarded the canal company a prior hen upon various portions of the stock based upon unpaid assessments thereon, aggregating $89,417.64. Those assessments the appellants claim .to have been void, but we do not find it necessary to decide that question.

In the ease of Twin Falls-Salmon River Land & Water Co. v. Caldwell, 242 F. 177, 190, 155 C. C. A. 17, we said, among other things: “The construction of the system necessarily required the furnishing from some source of the money with which to do the work; the compensation to the construction company for the liability assumed by it in procuring the required money and in doing the work must of necessity come from the sale of the lands and of rights to the appropriated water; and of that fact both Congress and the state were, of course, well aware, as is shown by the legislation that has been referred to. In the execution of the project, the contract between the state and the construction company, and the contract between that company and the settlers, were made. Manifestly, they are to be read together and in connection with the statutes of Congress and of the state, to which the contracts expressly referred. The construction company, the settlers, and the parties who furnished the money for the building of the system, receiving as security therefor the liens authorized both by Congress and the state, are therefore, each and all, charged with full knowledge of the laws and of the provisions of the contracts.” That is the law of this court respecting such eases, it never having been overruled or questioned so far as we know.

We must therefore take it that the appellees are bound by "all of the provisions of the respective contracts, and by all of the provisions of the acts of Congress, and all of the provisions of the acts of the state of Idaho upon the subject. Among the latter is section 3019 of the Compiled Statutes of Idaho, which reads as follows:

“Any person, company or association, furnishing water for' any tract of land, shall have a first and prior lien on said water right and land upon which said water is used, for all deferred payments for said water right; said lien to be in all respects prior to any and all other liens created or attempted to be created by the owner and possessor of said land; said lien to remain in full force and effect until the last deferred payment for the water right is fully paid and satisfied according to the terms of the contract under which said water right was acquired.”

The learned judge of the court below held that that section of the Idaho statute is not applicable to the ease, and, even if applicable, was waived by the contract between the state and the construction company, and by the articles of incorporation of the canal company, and by its by-laws. ■

The first and main reason assigned by the trial court in its opinion for such holding is that the priority of liens thereby given to the person or company furnishing the water for the irrigation of the land is only over liens “created or attempted to be created by the owner and possessor” of such land.

We think that construction wholly inadmissible. The very purpose, if not the sole purpose, both of Congress and of the state, in enacting the legislation in question, was the supplying of dry and practically valueless public land with water, thereby putting it under profitable cultivation, to do which extensive and expensive irrigating systems-were obviously necessary, the money for which of necessity had to be provided, and, if borrowed had to be satisfactorily secured. Those who furnished the money were, in our opinion, obviously and necessarily the parties to whom the statute gave priority of lien, and in the nature of things necessarily had to .do so, if the money was to be furnished. That such was the manifest intention of the statute is, we think, conclusively shown by its concluding clause, which declares: “Said lien to remain in full force and effect until the last deferred payment for the water right is fully paid and satisfied, according to the terms of the contract under which said water right was acquired'.”

The intermediate clause, “Said lien to be in all respects prior to any and all other liens created or attempted to be created by the owner and possessor of said land,” merely gives expression to what would otherwise be clearly the legal effect of the section. Not only so, but the contract between the state and the construction company expressly declares : “That this contract is made and entered into by virtue of the provisions and subject to * * * the laws of the state of Idaho accepting the terms of the 'Carey Act,’ * * * and that such laws * * * are as much a part of this contract as if specifically set forth.” And section 8 of article VIII of the by-laws of the canal company expressly declares that “all shares of this corporation shall be held subject to the rights of the Portneuf-Marsh Valley Irrigation Company, Limited, until the amount due to such company, its successors or assigns, shall have been fully and finally paid, as provided in the contract between said corporation and the purehásers of shares, and as provided in the contract between the said Portneuf-Marsh Valley Irrigation Company, Limited, and the state of Idaho.”

We are of the“opinion that, upon the case made by the record, the bondholders are legally and equitably entitled to a prior lien for the amount due thereon on the entire irrigation system in question and its waters, and upon the interest in the said system and waters represented by the stock acquired by and held in the treasury of the canal company.

The case is accordingly remanded, with directions to the court below to modify the decree in accordance with the views above expressed, and, as so modified, it will stand affirmed.


author: BINGHAM, Circuit Judge.

text:
    In re LAHONGRAIS. Petition of MARCHAND.
    (Circuit Court of Appeals, First Circuit.
    May 27, 1925.)
    No. 1661.
    1. Bankruptcy <§=>482(1) — Administrative order subject to reconsideration until estate is closed.
    An order of a referee allowing the claim of an attorney for services to bankrupt or the estate is an administrative order, and subject, at any time before the closing of the estate, to review by the court or judge, and to such disposition as the equities of the ease require.
    2. Bankruptcy <§=>477 — Creditors entitled to notice of claim for expenses of administration.
    A referee is without authority to allow a claim against an estate for an expense of administration without notice to creditors.
    3. Bankruptcy <§=>477 — Court has power to set aside fraudulent allowance.
    A court of bankruptcy is a court of equity, and as such has power to set aside an allowance made as an administration expense, when it appears that it was procured through fraud, or is so grossly excessive as to be tantamount thereto.
    Petition to Revise Order of the District Court of the United States for the District of Porto Rico; Odlin, Judge.
    In the matter of A. De Lahongrais, bankrupt. Petition of R. V. Perez Marehand to revise an order of the District Court.
    Affirmed.
    Antonsanti & La Costa, of Sab. Juan, Porto Rico, for petitioner, submitting on brief by leave of court.
    Nelson Gammans, of New York City, for respondent.
    Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.
   BINGHAM, Circuit Judge.

This is a petition to revise an order of the federal District Court for Porto Rico, vacating an administrative order of a former referee in bankruptcy whose resignation had been accepted for gross abuses and evil administration of the Bankruptcy Law (Comp. St. § 9585 et seq.) in the Ponce division.

It appears that one Lahongrais filed a voluntary petition in bankruptcy on the 21st day of December, 1921; that adjudication was thereafter had, and the ease referred to the referee in the Ponce division above referred to; that thereafter the present petitioner, Perez Marehand, attorney for the bankrupt, on the 16th day of January,-1922, filed a petition with said referee asking that he be allowed $3,000 out of the bankrupt estate for services rendered the bankrupt, but alleged to be for the benefit of the estate; that, on January 17, 1922, the referee allowed the petitioner $2,500, and ordered the trustee to pay the same, which was paid the following day; that this order was made without notice to creditors; that, on February 29, 1923, 11 creditors of the bankrupt, doing business in New York, filed a petition with the District Judge, in which they set out that they were creditors whose claims had been allowed; that the referee above referred to, in January, 1922, entered an order allowing Perez Marehand, as attorney for the bankrupt, $2,500, and ordered^ immediate payment; that the allowance was grossly excessive ; that, in so far as the services related to matters which lawfully could be paid out of the bankrupt’s estate, they did not exceed $250 in value; that the order was without notice to creditors; that the petition for allowance upon which the order was granted represented that the bankrupt’s estate was worth $60,000, whereas in fact it was worth not more than $12,000; that the petitioners did not leam of said allowance until January, 1923; that they acted immediately on receiving such information, and have not been guilty of laches; that application had been made to the trustee to take action toward recovering said allowance, or the major part thereof; and that he had refused to take action. The prayer was that Perez Mareh- and be- ordered to return to the tmstee the sum of $2,250.

An answer was filed, in which the respondent objected to the jurisdiction of the court on the ground that it was an attempt to review an order and decision of a referee in bankruptcy which was rendered more than a year before said petition was sued out, and contrary to rule 88 of that court and General Order in Bankruptcy 27; and for further answer the respondent averred that the referee “proceeded on a bona fide basis of a percentage of the estate when he ordered payment to” Perez Marehand; that the referee “in good faith followed precedent of this very court in similar eases”; that Perez Marehand “filed his petition for, and obtained payment of, fees in this ease when the estate was known to the referee in charge to justify the amount received”; and that the remedy sought “will result in an unjust and harsh discrimination against” the respondent.

A hearing was had before the District Judge on the petition, answer, and affidavits in support thereof,- who found that the facts set out in the petition were true.

In answer to the contention that the action of the petitioning creditors was in violation of rule 88 of the District Court and General Order in Bankruptcy 27, the court said:

“I consider that it is an honest and proper attempt on the part of these creditors to protect themselves against an illegal, unauthorized, and unjustified action taken by the former referee in bankruptcy in favor of a certain attorney representing the bankrupt, and that it is the duty of the court to correct such action.”

The court also held that the respondent had no vested right in the money, as claimed in his answer; that, when he received the money, “he took it subject to the review of this court upon a proper petition”; that there had been “no laches on the part of the petitioners”; that the proofs showed that the “petitioning creditors acted with proper promptness in applying to the judge of this court for relief against the payment”; that, “assuming that the estate had been actually worth $60,000, the allowance of $2,500 in cash to the attorney for the bankrupt within a few days after the filing of the petition would have been grossly excessive”; and that “the former referee showed either undue favoritism or gross ignorance of his duties in allowing any such sum as $2,500, and ordering the same paid at once.”

. As to the allegation in the answer that the former referee in good faith followed precedents of the court in similar eases, the court said:

“No such precedents are cited in support of this allegation. I will say, however, that since I have become judge of this court I have found that the same former referee did commit similar acts, of gross and excessive allowances in other bankruptcy eases to certain attorneys in the city of Ponce, and these cases are now before me for review under circumstances similar to those existing in the present ease.”

He also found that the referee in bankruptcy could have had no knowledge that the bankrupt estate amounted to $60,000 before it was disposed of, and the actual result showed that it yielded less than. $12,000; that the payment of $2,500 “was utterly illegal, null, and void”; that the sum of $250 would be ample remuneration; that “any sum in excess thereof is virtually robbing the creditors of the bankrupt, and if [he] were ■to- deny relief in the present ease [he] would feel that [he] was making [himself] largely responsible for the gross abuses and evil administration of the Bankruptcy Law * * * as it was administered and handled in the Ponce division of this court previous to the time that [he] accepted the resignation of” the former referee.

The contentions made by the petitioner are that the court erred in taking jurisdiction on a petition to vacate the order, rather than through the proceeding for review provided for in rule 88 of 'the District Court and General Order in Bankruptcy 27; that, under General Order 27, a creditor desiring a review by the judge of an order made by the referee is required to file his petition with.the referee; that, under rule 88, such a petition is required to be filed with the referee in bankruptcy within 20 days of the decision complained of; that the rule and order provide the only remedy available for the purpose; and that notice to creditors was not necessary to the validity of the referee’s order.

The contention as to jurisdiction is disposed of by the decision in In re De Ran, 260 F. 732, 171 C. C. A. 470, where the Court of Appeals for the Sixth Circuit said:

“We see no force in the contention that the referee’s allowance of petitioner’s account [the account of an attorney for the trustee] amounted to an adjudication which the District Judge had no jurisdiction to set aside. Had the claim been that of a creditor it would, under section 57k of the act (Comp. St. § 9641), be subject to reconsideration and rejection, in whole or in part, at any time before the estate was closed. But while the claim was not that of a creditor, and so not subject to the statute, it was, nevertheless, being an administrative order, subject at any time before the closing of the estate to reexamination and to such disposition as the equities of the ease require” — citing In re Ives, 113 F. 911, 51 C. C. A. 541, and Davidson v. Friedman, 140 F. 853, 72 C. C. A. 553.

And in this circuit'it has been held that the District Court, as a court of bankruptcy, has power to re-examine its orders during the pendency of a bankruptcy case upon timely and proper application, and that it is always open and has no terms of court. In re De Lue (C. C. A.) 295 F. 130.

If any portion .of the petitioner’s claim was allowable against the estate of the bankrupt, it must have been on the ground that it was an expense of administration. In iconsidering the power of a referee to allow an expense of administration without notice to creditors this court, in In re Plymouth Rubber Co. (C. C. A.) 298 F. 598, said:

“No referee has power, without notice to creditors, thus to allow expenses against a bankrupt estate, which estate, in the ordinary ease, belongs to the creditors, after paying the expenses of administratibn.”

And, after citing section 62 and section 58a (6) of the Bankruptcy Act, the court continued:

“Here are express provisions declaratory of the fundamental and familiar principle that the beneficial owners of an estate are entitled to be heard as to the expenses of administration chargeable against that estate. Of course, in the ordinary case, trustees run no practical risk in paying, before the filing and allowance of their final account, expenses which in nature and amount are plainly indisputable. But when, as in this case, large expenses are in question, no tribunal should undertake to determine the amount of such fees without notice to the creditors and to any other parties in interest.”

General Order in Bankruptcy 42, promulgated by the Supreme Court April 13, 1925, is a recognition and confirmation of the decision in In re Plymouth Rubber Co., for the rule there laid down, not only requires that an attorney seeking an allowance for services rendered shall file a petition setting forth his claim and that the petition shall be heard at a meeting of creditors, but that the referee shall notify the creditors under section 58 of the Bankruptcy Act and shall state by whom and in what amount the compensation is asked.

Furthermore a court of bankruptcy is a court of equity, and has jurisdiction as such court to set aside an allowance made as an administration expense, when it appears that it was procured through fraud, or that the amount allowed was so grossly excessive as to be tantamount thereto. Bardes v. Hawarden Bank, 178 U. S. 524, 535, 20 S. Ct. 1000, 44 L. Ed. 1175.

The order of the District Court is affirmed, with costs.


author: HUNT, Circuit Judge.

text:
    TIMELL v. UNITED STATES.
    (Circuit Court of Appeals, Ninth. Circuit.
    May 18, 1925.)
    No. 4510.
    1. Criminal law <@=>829(I) — Requested instructions properly refused.
    Where the charge given is full and fair to defendant, it is not error to refuse requested instructions making specific reference to the evidence.
    2. Intoxicating liquors <@=169 — Doctrine of agency not applicable to unlawful possession.
    One charged with unlawful possession of liquor is not entitled to acquittal on the ground that his possession was as agent of another.
    3. Criminal law <@=830 — One erroneous proposition of law in a requested instruction justifies its refusal.
    It is not error to refuse a requested instruction containing several propositions of law, one of which is unsound.
    In Error to the District Court of the United States for the Northern Division of the District of Idaho; Frank S. Dietrich, Judge.
    Criminal prosecution by the United States against Albert Timell. Judgment of conviction, and defendant brings error.
    Affirmed.
    W. B. McFarland, of Coeur d’Alene, Idaho, and W. D. Keeton, of St. Maries, Idaho, for plaintiff in error.
    E. G. Davis, U. S. Atty., W. H. Langroise, and James F. Ailshie, Jr., Asst. U. S. Attys., all of Boise, Idaho.
    Before GILBERT, HUNT, and RUDKIN, Circuit Judges.
   HUNT, Circuit Judge.

Plaintiff in error, Timell, was convicted under a count charging possession, and ánother charging sale, of a quantity of moonshine whisky.

Jumstrong, a deputy sheriff, testified r That he saw Timell at a boarding house at St. Maries, Idaho; that in the morning, about breakfast time, he asked Timell, who conducted the boarding house in which the conversation was had, whether there was any chance to get a drink of whisky, saying he had been wet, and believed a drink would warm up his stomach. Timell said that he could get him a bottle; that about an hour afterward Timell handed him a bottle of moonshine whisky, for which he paid Timell $3.50; that Bracken, a federal prohibition officer, was present at the time of the sale. Bracken testified that he heard Armstrong ask Timell if he knew where he could get a bottle, as he had been fishing and was cold and wet, that after they returned to the house, about an hour after the conversation, Timell asked Armstrong if -he still wanted the whisky, that he saw Armstrong hand $3.-50 to Timell, and that the bottle contained moonshine whisky.

Timell testified in his own behalf that Armstrong said he was sick and had a stomachache; that after Armstrong had importuned him five or six times, he told Armstrong that if he was “feeling that bad, and was going to die,” he would try and get something for him, but that he did not know whether he could or not; that pursuant to that conversation he bought a bottle of whis-ky for him, and was paid for it the same sum that he paid to the man from whom he bought the liquor.

The principal assignments of error are based upon the giving of certain instructions and the refusal to give certain requests. The court, after stating that the issue turned upon the question as to what inducements were held out by the government witnesses to dé-, fendant, as a result of which he procured and furnished the liquor, said that it was entirely proper for .persons engaged in detecting crime to go about under cover, or unidentified, and, where they suspected that, liquor was being sold or kept in violation of the law, to go to the suspected person and propose a violation of the law by asking for liquor, and added:

“Upon the other hand, it is not proper for one representing the government as a special agent, either under cover or otherwise, by representations as to his physical condition —that is, by feigning to be in agony or great pain, or seriously ill — to play upon the sympathies of a citizen, and thus get him to violate the law. You will see the distinction between the two eases. Now for one to simply say that he is cold and tyould like to have something to warm up his stomach, or that he has been wet and that a drink of whisky might make him feel better, that wouldn’t be a violation of the law. But, upon the other hand, and I am amplifying somewhat, so that you will see that, while the line may not be so easily defined, still by using your common sense you will see the difference between what is proper and what is improper. As I have already indicated, an agent cannot go further, and feign serious illness, or pretend that he is in very great pain, and thus appeal, as I say, to the sympathies of a citizen, and get him to do what otherwise he would not think of doing; that is, violate the law for the purpose of relieving what is supposed to be agony or pain of a fellow man.”

The court also charged that it was for the jury to. say upon which side the truth was. “Did the officers go there, as the defendant contends, and one of them pretend to be in very great pain, and thus play upon the sympathy and compassion of the defendant? If so, you should acquit. Upon the other hand, if the deputy sheriff, Armstrong, simply suggested that he was wet, and a drink of whisky, a bottle of whisky, might warm .up his stomach, or make him feel better, something of that kind, that would be within his rights, and you could properly convict.”

Those instructions were specially fair tó the defendant, and he was not prejudiced by the refusal of the court 'to give his requests, containing more detailed references to the testimony. Ritter v. United States (C. C. A.) 293 F. 187; Goldberg v. United States (C. C. A.) 295 F. 447; Newman v. United States (C. C. A.) 299 F. 128; Bakotich v. United States (C. C. A.) 4 F.(2d) 380.

' Error is also assigned upon the refusal of the court to charge that, if the jury believed Timell acted as the agent of Armstrong, and simply as a messenger in the purchase of the whisky, and was not pecuniarily interested, then Timell was a purchaser, and not a seller, and should be acquitted. Whatever might have been said of the request, if it had been limited to the evidence under the count which charged a sale, it was clearly erroneous in assuming that one who has liquor in his possession must be acquitted of the charge of unlawful possession, if he can prove that possession was merely as the agent of another. The doctrine of agency is not applicable to such a ease. State v. Caswell, 2 Humph. (Tenn.) 399; State v. Chauvin, 231 Mo. 31, 132 S. W. 243, Ann. Cas. 1912A, 992; State v. Bugbee, 22 Vt. 32.

Where a requested instruction contains several propositions of law, one of which is unsound, refusal to grant the request is not error. Texas & P. R. Co. v. Humble, 181 U. S. 57, 21 S. Ct. 526, 45 L. Ed. 747; Chicago & Great Western v. Roddy, 131 F. 718, 65 C. C. A. 470; 14 R. C. L. 800; 16 C. J. § 2507. We find no error.

The judgment is affirmed.


author: PAGE, Circuit Judge.

text:
    In re PAOLI LITHIA SPRINGS HOTEL CO. JEFFERY v. RATTS (two cases).
    (Circuit Court of Appeals, Seventh Circuit.
    March 19, 1925.
    Rehearing Denied May 14, 1925.)
    Nos. 3407, 3408.
    1. Mortgages <©=»249(3) — Owner of claim secured by mortgage on property purchased by bankrupt held entitled to secured claim.
    Where two of bankrupt’s directors, after purchasing property subject to mortgage, and after being notified that mortgagee had assigned mortgage, obtained release of mortgag-e from mortgagee who because of feeble health had likely forgotten assignment, held, one owning debt secured by mortgage was entitled to secured claim against bankrupt.
    2. Bankruptcy t§=o463 — Where evidence heard by Teferee and District Court is not presented, questions of evidence must be resolved against appellants.
    . On appeal from ruling on claim, where all evidence heard by referee and District Court is not presented, all questions of evidence must be resolved against appellants.
    3. Bills and notes <@=>134 — Note of bankrupt corporation and collateral agreement held Independent contracts.
    Note given by bankrupt corporation and collateral agreement for deposit of mortgage bonds as security helll, independent contracts.
    4. Subrogation <@=>33(2) — Indorser paying note subrogated only to rights of holders in collateral security.
    Indorser paying note does not bold as purchaser, and is subrogated only to rights of holders in collateral security.
    5. Corporations <@=>404(2), 406(2) — Under Indiana law, president of private corporation has no ex officio power to bind corporation or control Its property.
    Under Indiana law, president of private corporation has no ex officio power to bind corporation or control its property.
    6. Bills and notes <@=>340 — Corporation held not liable on note fraudulently sold by a majority of its directors.
    Where three of five directors, acting without authority, executed note, and two of them, falsely representing that corporation owed one of such directors a large sum, negotiated it, permitting part of proceeds to be retained by purchaser in satisfaction of claims against such director individually, and depositing mortgage bonds as security, held,, that such purchasers. were not innocent purchasers, and corporation was not liable on note, and indorser paying it could not enforce the security.
    Appeals from the District Court of the United. States for the District of Indiana.
    In the matter of the bankruptcy of the Paoli Lithia Springs Hotel Company; Oscar Ratts, trustee. Prom rulings on claims presented, two appeals have been taken by Harold W. Jeffery.
    Affirmed.
    Harry N. Weinberg and Theodore E. Rein, both of Chicago, Ill., for appellant.
    James A. Ross, of Indianapolis, Ind., for appellee.
    Before ALSCHULER, EVANS, and PAGE, Circuit Judges.
   PAGE, Circuit Judge.

No. 3407 is an appeal from an order of the District Court, allowing the claim of Mary T. Smith as a secured claim against the Paoli Lithia Springs Hotel Company, an Indiana corporation, in bankruptcy. In No. 3408 appellant was refused allowance of his claim as a secured claim, because the court held he was not entitled to the benefit of collateral, securing a note set out herein and paid by him as indorser.

No. 3407. The Smith claim was allowed as a secured claim because claimant owned a debt, secured by a mortgage to one Boyd on property purchased by bankrupt subject thereto. Irwin and Bainum, president and secretary, respectively, of bankrupt, and also two of its directors, secured a release of that mortgage from Boyd, another director, 10 days after they, acting for bankrupt, agreed in writing to take the property subject to the mortgage, and 10 days after they had been told that Boyd did not hold it, but that it was then held by one Judge Paine. It had been assigned a year before by Boyd to Paine, but Boyd was in feeble health and had probably forgotten the assignment. He is now dead. Securing the release was an act of bad faith and a fraud upon the rights of Mrs. Smith, who was not at fault.

No. 3408. By special authority from bankrupt’s board of five directors, in a regular meeting authorizing them so to do, Irwin, president, and Bainum, secretary, executed a deed of trust to the Paoli State Bank, as trustee, on bankrupt’s property, and executed and delivered to the trustee $500,000 in bonds, secured by the trust deed, so that the bonds might be delivered to Binkley & Bund, who had purchased them under an agreement also authorized by the board at the same meeting. Binkley & Bund never took or paid for a single bond.

Irwin, president, Wham, vice president, and Bainum, secretary and treasurer, three of the directors, without in any way being authorized so to do, executed in the name of bankrupt, and tried to sell in Chicago, a note for $55,000; but even after Ayers, vice president of Binkley & Bund, had procured its indorsement by appellant, it could not be sold. Irwin and Wham attended what the bankers said was a meeting of Wham’s creditors, who were trying to force payment by him of about $30,000, which he owed them. Wham and Irwin falsely represented to the bankers that bankrupt owed Wham $20,000, when in fact it owed him but $3,500. They made an arrangement there, which was later consummated at Indianapolis, whereby the bankers took the note and credited bankrupt with $35,000, and applied $20,000 in payment of Wham’s debts to them. Of the $35,000, $7,500 was given Binkley & Bund, apparently as a gratuity, and $3,000 to appellant for his indorsement. The note reads:

“Paoli, Indiana, October 22, 1921. “$55,000.00.

“On or before Eebruary 10, 1922, we promise to pay to ourselves or order at - fifty-five thousand and no/100 dollars, for value received, with interest at the rate of seven (7) per cent, per annum, after date, having deposited as collateral security-first mortgage bonds of the Paoli Lithia Springs Hotel Company in number and amount as per schedule hereto attached, and marked Exhibit A. Said bonds are now on deposit with the Continental & Commercial National Bank of Chicago, Illinois, and in case of default in the payment of this note at maturity we hereby authorize the trustee named in said bond issue to deliver said bonds to the legal holder hereof. The right is hereby expressly reserved to withdraw any or all of the bonds herein referred to upon payment to the Continental & Commercial National Bank of 87% per cent, of the par value of said bonds so withdrawn, together with accrued interest thereon; but all payments so made and received by the Continental & Commercial National Bank shall be forthwith remitted by the trustee to the legal holder hereof until the payment of this note is made in full, together with accrued interest thereon. We hereby give the said legal holder authority to sell all and any part thereof, on the maturity of this note, or any time thereafter, at public or private sale, at their discretion, without advertising the same, or giving us any notice, and to apply so much of the proceeds thereof to the payment of this note as may be necessary to pay the same, with all interest due thereon, and also to the payment of all expenses attending the sale of said bonds, and in case the proceeds of the sale of the said bonds shall not cover the principal, interest, and expenses, we promise to pay the deficiency forthwith after such sale.

“Paoli Lithia Springs Hotel Company,

“By W. C. Irwin, President.

“By Chas. A. Bainum, Treasurer.

“Due February 10th, 1922.

“[$11 in canceled documentary stamps.]” Indorsed on back:

“Paoli Lithia Hotel Company,

“By W. C. Irwin, President.

“By Chas. A. Bainum, Treasurer.

“Binkley & Bund, Inc.

“By J. W. Rankin, President and Treasurer.

“Iroquois Trust Company,

“By R. M. Ayers, President.

“By J. W. Rankin, Treasurer.

“W. C. Irwin.

“Chas. A. Bainum.

“Wm. Wham.

“J. W. Rankin.

“R. M. Ayers.

“H. W.' Jeffery.”

The trustee, on a written order, as its cashier testified, from Irwin and Bainum, directed the Chicago bank, where it left the bonds for safe-keeping, to turn the bonds over to the holders of the note. No such order is in the record. All questions on the evidence must be resolved against appellant, because there was much evidence before the referee and the District Court not presented here. . Upon payment of the note by appellant, as indorser, the bonds were delivered to him. He was not a witness.

The bankers knew Irwin, Wham, and Bainum were officers and directors of bankrupt, and investigated bankrupt’s property at Indianapolis. They asked what the minutes of its meeting showed, but never examined them, although they seemed to know they were important. The by-laws provided for an executive committee of four members. Only three, the directors above named, were appointed. What the committee’s powers were does not appear, and the three never pretended to ■ act as such. The ’ treasurer made a report, after the loan, that was approved by the directors; but whether others than the three in question were present does not appear, and the report as submitted did not honestly reflect the transaction.

1. The note and the collateral agreement therewith are two contracts, not one.

2. Appellant did not buy the note, but paid it as an indorser. He was, as to the collateral, only subrogated to the rights of the holders to whom the note was negotiated, and his rights thereto are measured by their rights. 2 Williston on Contracts, § 1265, p. 2302; Ætna Life Ins. Co. v. Middleport, 124 U. S. 534, 8 S. Ct. 625, 31 L. Ed. 537; Hunningsen v. U. S. Fidelity & Guaranty Co., 208 U. S. 404, 28 S. Ct. 389, 52 L. Ed. 547; Phœnix Ins. Co. v. Erie Transportation Co., 117 U. S. 312, 6 S. Ct. 750, 29 L. Ed. 873.

3. The Supreme Court of Indiana has stated the general rule as to the powers of presidents of corporations to be: “That the office of president of a private corporation of itself confers no power on the incumbent to bind the corporation or control its property. His powers as agent must come by delegation from the corporation through the board of directors, formally and directly granted, or implied from its habit or custom of doing business.” Wainwright v. Roots Co., 176 Ind. 682, 686, 97 N. E. 8, 9, and eases cited. The Wainwright Case concerned a manufacturing corporation, and there would seem to be greater reason to apply even a stricter rule to the officers of, bankrupt, a voluntary nontrading hotel corporation. St. Vincent College v. Hallett, 201 F. 471, 119 C. C. A. 647 (7th C. C. A.); In re Continental Engine Co., 234 F. 58, 148 C. C. A. 74 (7th C. C. A.).

4. It is said that the acts upon which appellant relies were the acts of a majority of the board of directors, and therefore binding on bankrupt. It does appear that Irwin, president, Wham, vice president,' and Bain-um, secretary and treasurer, were three of the five directors; but as there is no record authorizing their acts, even if they are to be considered as acting as directors, we must look solely to what they did. In the Wainwright Case, supra, the court said: “The general rule seems to be that where the contract between a corporation and one of its directors is made on the part of the company by a majority of the directors acting for its interests, honestly and in good faith, and with full knowledge of the matter, or by another independent agent with authority to act for it, such contract is not even voidable, except for unfairness or fraud, for the presence of which courts will closely scrutinize the contract.”

Irwin and Wham, in falsely representing to the bankers that the debt of bankrupt to Whám was nearly six times as large as it actually was, were not dealing fairly as directors or officers. Wham, in taking bankrupt’s money to pay his debts, defrauded the corporation. His act was no less a fraud because the bankers believed what Wham and Irwin said about the amount of bankrupt’s debt to Wham. When they took bankrupt’s money to pay the debt of bankrupt’s agent to themselves, they took at their peril. They were not innocent purchasers, and the unfaithful servant could not bind the master. Bank v. Nichols & Shepard Co., 223 Ill. 41, 79 N. E. 38, 7 L. R. A. 752; Campbell v. Balcomb, 183 F. 766, 106 C. C. A. 474 (7th C. C. A.); Am. Nat. Bank v. Miller, 229 U. S. 517, 33 S. Ct. 883, 57 L. Ed. 1310; 2 Corpus Juris, 868, § 549. No course of dealing by Irwin and Bainum existed from which authority in them to bind bankrupt might be presumed. The only other act by them, pertaining to a loan, was specially authorized by the board of directors and ratified by the stockholders. The note was not the note of bankrupt, and the purchasers of the note had, and appellant has, no right to enforce collection of the collateral.

It is also to be noted that the provisions of the trust deed, under which appellant is claiming, are sufficient notice to him that, without some special authority, neither the trustee nor Irwin and Bainum had any power to hypothecate the bonds.

The orders in Nos. 3407 and 3408 are both affirmed.


author: STONE, Circuit Judge.

text:
    STOCKYARDS NAT. BANK OF SOUTH OMAHA v. BAUMAN, County Treasurer, et al.
    (Circuit Court of Appeals, Eighth Circuit.
    April 27, 1925.)
    No. 6829.
    1. Courts >@=>366(1) — Federal courts governed by local law as to validity of state statute.
    On the question whether a state statute is a valid law and in force, the federal courts are bound by the decision of the highest court of the state.
    2. Constitutional law <@=>38 — Statute adjudged unconstitutional not revived by removal of ground of invalidity.
    Under the law of Nebraska, a state statute, adjudged unconstitutional by the Supreme Court of the state as in violation of the state Constitution, does not become operative on the subsequent removal of the ground on which such decision was based.
    Appeal from the District Court of the United States for the District of Nebraska; Joseph W. Woodrough, Judge.
    Suit in equity by the Stockyards National Bank of South Omaha against Otto J. Bau-man, personally and as Treasurer of Douglas County, Neb., and others. Decree for defendants, and complainant appeals.
    Reversed, with instructions.
    Edgar M. Morsman, Jr., of Omaha, Neb., for appellant.
    George W. Ayres, of Lincoln, Neb. (O. S. Spillman, of Pierce, Neb., Hugh La Master, of Tecumseh, Neb., and W. W. Slabaugh, of Omaha, Neb., on the brief), for appellees.
    Before STONE and LEWIS, Circuit Judges, and SCOTT, District Judge.
   STONE, Circuit Judge.

This is a bill by a national bank against certain taxing officials of the state of Nebraska. The basis of the bill is that the officials are exercising and claiming the right to tax the capital stock of the bank at the full mill rate levied upon real estate instead of 25 per cent, of that rate. The controversy presents but one question and that is one of law, to wit, whether section 5887, Compiled Statutes of Nebraska 1922 (section 4 of article 8, chapter 133, Session Laws 1921), is a valid existent provision of law governing national bank taxation of this character of property. There is no question that this section was expressly Intended to govern the taxation of shares of •capital stock in national banks, but the real question is whether this section is now in force, and, if in force, whether legally applicable to national banks.

Section 5219, Revised Statutes of the United States (Comp. St. § 9784), prior to March, 1923, permitted a state to tax the shares of national banks provided the tax when levied should be at no greater rate than that imposed upon other moneyed capital. When the state Legislature enacted this taxing statute, it was promptly attacked both by the national banks, through a bill filed in the United States court, 'and by the state banks, through a bill filed in the state court. The suit in the federal court resulted in the state staiate being held violative of section 5219 of tie Revised Statutes because section 4 required a rate on the bank stocks equal to the fuE rate on real estate while it required, under section 1 of the same act, taxation of other moneyed capital at only 25 per cent, of that rate. In the state court suit, the state Supreme Court held that section 4 was violative of section 5219 of the Revised Statutes of the United States and therefore could not be applied to national banks and that to apply it to state banks alone would result in the taxation of state bank shares at the full mill rate while national bank shares were taxed at only 25 per cent, thereof and that this discrimination rendered the act unconstitutional under the state Constitution. The result of these two suits was that section 4 was declared invalid and all bank stock was thereafter taxed, under section 1, at 25 per cent, of the full null rate applied to real estate. Thereafter, in March, 1923, Congress amended section 5219 (42 Stat. 1499). That portion of the ^amendment material to be considered here qualified the requirement that national bank stocks should not be taxed at a greater rate than other moneyed capital in the hands of individual citizens by the expression “coming into competition with the business of national banks: Provided, that bonds, notes, or other evidences of indebtedness in the hands of individual citizens not employed or engaged in the banking or investment business and representing merely personal investment not made in competition with such business, shall not be deemed moneyed capital within the meaning of this section.” Without any subsequent legislative action by the state, the taxing officials sought thereafter to apply section 4 to the taxation of national bank shares on the theory that the above amendment had removed the obstruction to such taxation. Several points are here urged but, in our view of the law, it is necessary to consider only one.

' It is urged by appellant that when the state Supreme Court declared section 4 unconstitutional,, that legal provision was as though never enacted and could have no force thereafter; that if the state had the power and desired, after the above amendment to the national statute, to employ the rate of taxation set forth in section 4, it must re-enact that section at a time when it had power validly to do so. The answering position of appeUees is that section 4 was merely in suspension during the time it could not be legally enforced because of section 5219 and that whenever Congress should remove that obstruction, the- section would automatically operate and that such obstruction was removed by the above amendment to section 5219.

Questions of this character when apphed to state statutes are governed by the local law. The rule and the reason therefor are well set forth in Norton v. Shelby County, 118 U. S. 425, 6 S. Ct. 1121, 30 L. Ed. 178, where the court, at page 440, said:

“On many subjects the decisions' of the courts of a state are merely advisory, to be followed or disregarded, according as they contain true or erroneous expositions of the law, as those of a foreign tribunal are treated. But on many subjects they must necessarily be conclusive; such as relate to the existence of her subordinate tribunals; the eligibility and election or appointment of ■their officers; and the passage of her laws. No federal court should refuse to accept such decisions as expressing on these subjects •the law of the state. If, for instance, the Supreme Court of a state should hold that' an act appearing on her statute book was never passed and never became a law, the federal courts could not disregard the decision and declare that it was a law, and enforce it as such.”

This rule has been specifically applied in eases involving state taxing statutes. Stuts-man County v. Wallace, 142 U. S. 293, 306, 12 S. Ct. 227, 35 L. Ed. 1018.

What then is the rule in Nebraska concerning the status of a state statute which has been declared invalid by the, Supreme Court of that state, in so far as its being thereafter operative? This precise question, as applied to the very statute now involved, is answered by the Supreme Court of Nebraska in the case of Central National Bank of Lincoln v. Sutherland (Neb.) 202 N. W. 428, decided February 17, 1925. Pendeney of tbe Sutherland Case in the Supreme Court of Nebraska was called to our attention at the argument of this case and the above decision has been handed down since submission of this ease. That opinion sustains fully the above position taken by appellant. It rules this case in its favor. To the same general effect is Whetstone v. Slonaker, 110 Neb. 343, 193 N. W. 749. Also see Seneca Mining Co. v. Osmun, Secretary of State, 82 Mich. 573, 47 N. W. 25, 9 L. R. A. 770; State v. Tufly, 20 Nev. 427, 22 P. 1054, 19 Am. St. Rep. 374; Ex parte Bockhorn, 62 Tex. Cr. R. 651, 138 S. W. 707, for similar view in other jurisdictions.

The decree should be and is reversed with instructions to grant an injunction forbidding the levy upon these shares of stock at more than 25 per cent, of the mill rate levied on real estate.