author: PARKER, Circuit Judge.

text:
    CARTER v. UNITED STATES.
    No. 3126.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.

      J. Crawford Biggs, of Raleigh, N. C. (JM. Broughton, of Raleigh, N. C., on the brief), for appellant.
    Davis G. Arnold, Associate Gen. Counsel, U. S. Veterans’ Bureau, of Washington, D. C. (W. H. Fisher, of Clinton, N. C., U. S. Atty., and J. D. DeRamus, Regional Atty., of Charlotte, N.' C., on the brief) for the United States.
    Before PARKER and NORTHCOTT, Circuit Judges, and GLENN, District Judge.
   PARKER, Circuit Judge.

This is an action to recover disability benefits under a war risk insurance policy which was kept in force until July 31,1919. Plaintiff contends that at that time he was totally and permanently disabled within the meaning of the policy and has since remained in that condition. At the conclusion of the testimony a verdict was directed for defendant, and from judgment thereon plaintiff has appealed. The question in the ease is whether there was substantial evidence of total and permanent disability on the part of plaintiff commencing prior to July 31,1919, and continuing to the institution of the action. We think that there was.

Plaintiff was injured in battle on November 8, 1918. On November 11, 1918, he was ■severely gassed. He was sent to a field hospital, and later, in April, 1919, was sent to the United 'States. Upon his arrival here he was taken to Green Hut Hospital in New York City, where he remained three or four weeks. From New York he was sent to Camp Lee at Petersburg, Va., at which time, according to his testimony, he was coughing and spitting blood and was unable to work. He was discharged from the army on June 2, 1919, and went immediately to his home in Zebulon, N. C. On his way home, he suffered a hemorrhage on the train. He was sick upon his arrival, blind in one eye, and suffering from a bad cough. Two weeks later, while helping load a bag of oats on a wagon, he suffered another hemorrhage. He was examined by a physician in September following and found to be suffering from tuberculosis.

Plaintiff attempted to work in a knitting mill in Zebulon during 1919, but testifies that he stopped because he was not able to do the work. In January, 1920, he went to work with the Durham Hosiery Mill in Durham, N. C., but testifies that he was not able to work, that he coughed badly and spat up lots of blood. A neighbor noticed his condition and sent him to the Red Cross for treatment. He was placed in the hospital at Durham, was sent from there to the North Carolina Tuberculosis Sanatorium, and from there to Government Hospital No. 26 at Greenville, S. C., where he remained for fourteen months. From Greenville, he was sent home as permanently disabled some time in the year 1921. Since then he has been for treatment to the government hospital at Oteen, N. C., on four or five different occasions, has been to the Naval Hospital at Norfolk, Va., and has spent eighteen or nineteen months in a hospital at Johnson City, Tenn. There is evidence that he did some work in the years 1926 and 1927, but he testifies that he was unable to work regularly and that on some days he could not work at all.

Plaintiff is a manual laborer and is uneducated. The evidence is that when he entered the army he weighed 185 or 190 pounds, but that at the time of his discharge he weighed only 135 or 140 pounds, which was his weight at the time of the trial. His statement as to his condition and as to his inability to work was corroborated by a number of witnesses, several of whom were physicians.

We think that this evidence was amply sufficient to take the ease to the jury. Total and permanent disability within the meaning of these war risk insurance policies has been defined by a regulation promulgated by the Director of the Bureau of War Risk Insurance under section 13 of the War Risk Insurance Act 1917, as amended, 40 Stat. 555, and section 5 of the World War Veterans’ Act, 43 Stat. 608, 38 USCA § 426. White v. U. S., 270 U. S. 175, 46 S. Ct. 274, 70 L. Ed. 530. This regulation is as follows:

■ “Any impairment of mind or body which renders it impossible for the disabled person to follow continuously any substantially gainful occupation shall be deemed, in Articles III and IV, to be total disability.
“ ‘Total disability’ shall be deemed to be ‘permanent’ whenever it is founded upon conditions which render it reasonably certain that it will continue throughout the life of the person suffering from it. Whenever it shall be established that any person to whom any installment of insurance has been paid as provided in Article IV on the ground that the insured has become totally and permanently disabled has recovered the ability to continuously follow any substantially gainful occupation the payment of installments of insurance shall be discontinued forthwith and no further installments thereof shall be paid so long as such recovered ability shall continue.”

The word “continuously,” as used in the regulation, must be given a reasonable interpretation, and we approve the rule laid down by the Circuit Court of Appeals of the First Circuit in Ford v. U. S. (C. C. A. 1st) 44 F.(2d) 754, 755, as follows: “We think the word ‘continuously’ should be construed as meaning with reasonable regularity; that it does not cover mere periods of disability such as are ordinarily incident to the activities of people in generally sound health. On the other hand, if such claimants are able to follow gainful occupations only spasmodically, with frequent interruptions due to disability, they are entitled to recover under the act.”

The mere fact that a claimant may have worked for substantial periods during the time when he claims to have been permanently and totally disabled is not conclusive against him. The question is not whether he worked, but whether he was able to work, i. e., whether he was able to follow continuously some substantially gainful occupation without material injury to his health. • Of course, the fact that a man does work is evidence to be considered by the jury as tending to negative the claim of disability; but the fact that he works when physically unable to do so ought not defeat his right to recover if the jury finds that such disability in fact existed. In the case of tuberculosis the patient is notoriously able to carry on for a while and do a substantial amount of work, but in most cases the attempt to carry on results in an aggravation of the disease frequently ending in the death of the patient. “To say that the man who works, and dies, is as a matter of law precluded from recovery under the policy, but that one who following the advice of his physician refrains from such work, and lives, is entitled to recovery, presents an untenable theory of law and fact, and emphasizes the necessity for a determination upon the facts in each case whether the man * * * was able to continuously pursue a substantially gainful occupation.”

• The rule applicable in such cases was well stated by Judge Kenyon, speaking for the Circuit Court of Appeals of the'Eighth Circuit in U. S. v. Phillips (C. C. A. 8th) 44 F.(2d) 689, 691, as follows: “The government contends that the evidence of his working is so overwhelming that the court should have given a peremptory instruction to the jury. If the mere fact that the insured did work is conclusive evidence that he was not permanently and continuously disabled, then there should have been no recovery on this policy. The term ‘total and permanent disability’ does not mean that the party must be unable to do anything whatever; must either lie abed or sit in a chair and be cared for by others. The test laid down in the cases is well stated in United States v. Sligh (C. C. A.) 31 F.(2d) 735, 736, as follows: ‘The term “total and permanent disability” obviously does not mean that there must be proof of absolute incapacity to do any work at all. It is enough if there is such impairment of capacity as to render it impossible for the disabled person to follow continuously any substantially gainful occupation.’ Some persons, who are totally incapacitated for work, by virtue of strong will power may continue to work until they drop dead from exhaustion, while others with lesser will power will sit still and do nothing. Some who have placed upon them the burdens of caring for aged parents or indigent relatives, feeling deeply their responsibility and actuated by affection for those whom they desire to assist, will keep on working when they are totally unfit to do so. The mere fact that insured did work for' Smith-McCord-Townsend Dry Goods Company and also for Montgomery Ward & Co. does not necessarily prove that he could follow continuously a gainful occupation.” See, also, U. S. v. Rasar (C. C. A. 9th) 45 F.(2d) 545; Knight v. U. S. (D. C.) 45 F.(2d) 202; U. S. v. Meserve (C. C. A. 9th) 44 F.(2d) 549; Ford v. U. S. (C. C. A. 1st) supra; Malavski v. U. S. (C. C. A. 7th) 43 F.(2d) 974; Vance v. U. S. (C. C. A. 7th) 43 F.(2d) 975; U. S. v. Worley (C. C. A. 8th) 42 F.(2d) 197, 199, 200; U. S. v. Sligh (C. C. A. 9th) 31 F.(2d) 735; U. S. v. Cox (C. C. A. 5th) 24 F.(2d) 944; U. S. v. Eliasson (C. C. A. 9th) 20 F.(2d) 821.

And we think that under the evidence here the permanence as well as the totality of the disability was a question for the jury. A disability is permanent “whenever it is founded upon conditions which render it reasonably certain that it will continue throughout the life of the person suffering from it”; and where there is substantial evidence of such conditions, it is for the jury to say whether or not the disability in fact exists. Of course, not every case of tuberculosis constitutes a permanent disability; but where a case has continued as long as has that of the plaintiff here and has been attended with as many distressing symptoms, a reasonable man might well conclude that it would continue throughout the life of the insured.

In view of the arguments made before us in this and other cases as to the weight to be given to the testimony of physicians, we' think it well to observe that whether a disability caused by disease be of a permanent character or not is to be determined, not exclusively from the diagnosis made or the opinions given by physicians at the time of the onset of the disease, but by the history of the disease and all the other evidence in the ease. A disease causing total disability may be thought at first to be temporary in character; but, if its subsequent history shows that it is reasonably certain to continue throughout the life of the insured, it is to be deemed permanent within the meaning of the policy. And while the testimony of physicians is entitled to great weight in determining the nature and probable duration of disease, it is not necessarily conclusive upon the issue as to whether the disability of an insured be total and permanent within the rule as stated. If the evidence taken as a whole is of such character, when viewed in the light most favorable to the plaintiff, as reasonably to lead to the conclusion that he was totally and permanently disabled, the issue is for the jury, to be decided by them in the light of all of the evidence, including the testimony of the physicians.

For the reasons stated, we think that the learned judge below erred in directing a verdict for defendant. The judgment will accordingly be reversed and the cause will be remanded for a new trial.

Reversed.


source: Caselaw Access Project

license: Public Domain

text:
    UNITED STATES v. SEARLS et al.
    No. 3101.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.
    Okey P. Keadle, Asst. U. S. Atty., of Huntington, W. Va. (James Damron, U. S. Atty., and David F. Sheets, Asst. U. S. Atty., both of Huntingdon, W. Va., William Wolff Smith, Gen. Counsel, U. S. Veterans’ Bureau, and Bayless L. Guffy, Atty., U. S. Veterans’ Bureau, both of Washington, D. C., on the brief), for the United States.
    Roderick G. Merrick, of Charleston, W. Va., for appellees.
    Before PARKER and NORTHCOTT, Circuit Judges, and GLENN, District Judge.
   PARKER, Circuit Judge.

This is an appeal from a judgment in favor of plaintiffs, who are beneficiaries under a policy of war risk insurance issued to one Dolph C. Searls, who died April 22,1922. Insured was honorably discharged from the army May 13, 1919, and paid no premiums after his discharge. The grace period kept the policy operative to and including June 30, 1919, and the question in the case is whether he was totally and permanently disabled at that time.

There was evidence on the part of plaintiffs showing that insured had a bad cough when he came home from the army and that this cough grew worse and was accompanied by hemorrhages • or spitting of blood. He was found to have tuberculosis and died of that disease. There was evidence that from the time of his discharge he was unable to work regularly on account of his physical condition. Without reviewing the evidence at length, we are satisfied that it was amply sufficient to take the case to the jury on the theory that insured was totally and permanently disabled while the policy was in force, within the principles decided in Carter v. U. S. (C. C. A.) 49 F.(2d) 221, and that the motion of the government for a directed verdict was properly overruled.

Although the evidence was sufficient to support a verdict for plaintiffs, we do not think that it was sufficient to justify the direction of a verdict in their behalf; and a new trial must be awarded because the learned trial judge virtually directed a verdict for them. At the request of plaintiffs, he gave the jury an instruction to the effect that, if insured had tuberculosis at any time prior to his death on April 22, 1922, he was conclusively presumed to have contracted it during his service in the army, and to this instruction he added that under it he saw nothing for the jury to do but find a verdict for plaintiffs. The instruction was as follows: “The Court instructs the jury in the ease at bar, that if they believe from the evidence, that Dolph C. Séarls served in the Army of the United States of America between June 6, 1918 and March 13,1919, and if they believe from the evidence that the said Dolph C. Searls while in sueh United States Army within and for the period aforesaid had in force a contract of insurance with the United States of America in the amount of $10,000.00; an-d that the same was in full force and effect until or even after the time when the said Dolph C. Searls was discharged from said Army; and if the jury believe from the evidence in the ease at bar that Dolph C. Searls had an active tuberculosis disease at any time before April 22, 1922, the day of his death, then they, the jury, shall consider that sueh disease in point of law was conclusively presumed to have been contracted while the said Dolph C. Searls was in the United States Army between the period of June 6,1918, and March 13, 1919, and while sueh policy here sued on was in full force and effect; and sueh presumption, if any there is, cannot be rebutted in point of law.”

The remark of the judge made at the conclusion of reading this instruction and as his final word to the jury was as follows: “I am frank to say that under such instructions I can see nothing for you to do but find a verdict for the plaintiffs.”

The instruction complained of was based on what we think is a misinterpretation of a portion of section 200 of the World War Veterans’ Act, as amended by the Act of July 2, 1926, § 7, 44 Stat. 793, 38 USCA § 471, which, however, has been amended by the Act of July 3, 1930, Acts of 71st Congress, 2nd Session, part 1, p. 995, § 11 (38 USCA § 471). As the case was tried in the court below before the amendment of 1930, it is necessary to consider what presumption was created by the section in question prior to that amendment, and whether it had any application to the case presented here. We do not 'think that it did. Section 200 of the World War Veterans’ Act, 43 Stat. 615, 616, provided for the compensation and treatment of officers, enlisted men, etc., for injury or aggravation of injury suffered during the war. That section was as follows:

“Sec. 200. For death or disability resulting from personal injury suffered or dis- • ease contracted in the military or naval service on or after April 6, 1917, and before July 2, 1921, or for an aggravation or recurrence of a disability existing prior to examination, acceptance, and enrollment for service, when sueh aggravation was suffered and contracted in, or sueh recurrence was caused by, the military or naval service on or after April 6, 1917, and before July 2, 1921, by any commissioned officer or enlisted man, or by any member of the Army Nurse Corps (female) or of the Navy Nurse Corps (female) when employed in the active service under the War Department or Navy Department, the United States shall pay to such commissioned officer or enlisted man, member of the Army Nurse Corps (female), or of the Navy Nurse Corps (female), or, in the discretion of the director, separately to his or her dependents, compensation as hereinafter provided. * * * That for the purposes of this section every such officer, enlisted man, or other member employed in ' the active service under the War Department or Navy Department who was discharged or who resigned prior to July 2, 1921, and every such officer, enlisted man, or other member employed in the active service under the War Department or Navy Department on or before November 11, 1918, who on or after July 2, 1921, is discharged or resigns, shall be conclusively held and taken to have been in sound condition when examined, accepted, and enrolled for service, except as to defects, disorders, or infirmities made of record in any manner by proper authorities of the United States at the time of, or prior to, inception of active service, to the extent to which any such defect, disorder, or infirmity was so made of record: Provided, That an ex-service man who is shown to have or, if deceased, to have had, prior to January 1, 1925,- neuropsyehiatric disease, an active tuberculous disease, paralysis agitans, encephalitis lethargiea, or amoebic dysentery developing a 10 per centum degree of disability or more in accordance with the provisions of subdivision (4) of section 202 of this Act shall be presumed to have acquired his disability in such service between April 6, 1917, and July 2, 1921, or to have suffered an aggravation of a pre-existing neuropsychiatric disease, tuberculosis, paralysis agitans, encephalitis lethargiea, or amoebic dysentery in such service between said dates, and said presumption shall be conclusive in eases of active tuberculous disease, but in all other eases said presumption shall be rebut-table by clear and convincing evidence; but nothing in this proviso shall be construed to prevent a claimant from receiving the bener fits of compensation and medical care and treatment for a disability due to these diseases of more than 10 per centum degree (in accordance with the provisions of subdivision (4), section 202, of this Act) on or subsequent to January 1,1925, if the facts in the ease substantiate his claim.” (Italics ours.)

Section 200 was a part of title 2 of the act of 1924, which dealt with compensation and treatment. Title 3 of that act dealt with war risk insurance; and section 304 thereof (43 Stat. 625) related to the reinstatement of lapsed policies by disabled veterans suffering from injury or disease contracted during the war. It required as a condition of reinstatement of a lapsed policy that the applicant during his lifetime submit satisfactory proof showing the service origin of the disability or aggravation thereof. The act of 1924 was amended by the act of July 2,1926, so as to provide, among other things, for the reinstatement of the policies of disabled veterans in certain eases without proof that their disability was of service origin. To accomplish this result the proviso of section 304 requiring the applicant to submit proofs of the service origin of his disability was omitted and the words which we have italicized in section 200 of the Act of 1924, “that for the purposes of this section,” were changed by the amendment to read “that for the purposes of this Act.” 44 Stat. 793 and 799 (38 USCA §§ 471, 515). The effect, and we think the only effect, of this amendment was to give to the veteran the benefit of the presumption created by section 200 as to service origin of disability, not only in applications for compensation and treatment, but also in applications for reinstatement of lapsed policies.

On June 9, 1930, the Finance Committee of the Senate, reporting on the bill to amend the World War Veterans’ Act, had this to say with reference to the amendment to section 200 by the act of 1926: “The word ‘act’ was substituted for the word ‘section’ in the amendment to the World War veterans’ act dated July 2, 1926, in order to enable veterans to reinstate insurance under section 304 of the act, and show for that purpose that the disease from which they were suffering at the time of attempted reinstatement was of service origin. It was not intended by the change to enable a veteran in a suit on Government insurance to establish for the purposes of the suit that the disability on account of which the same was based was of service origin. Your committee has been informed that certain courts have so construed this section as it reads in the present law. In order to clarify the matter and show clearly the original intent of the Congress, your committee has therefore changed the word ‘act’ to ‘section and section 304 of this act,’ on page 15, lines 2 and 3.”

The change thus recommended was incorporated in the Act of July 3, 1930; and it is now made perfectly clear that the presumption as to service origin of disability now exists only as to the matters covered by sections 200 and 304 of the act. Acts of 71st Congress, part 1, page 995.

The decisions referred to in the report of the Senate Committee are presumably Brandaw v. U. S. (C. C. A. 9th) 35 F.(2d) 181, and unreported District Court decisions applying the same doctrine. Mulivrana v. U. S. (C. C. A. 9th) 41 F.(2d) 734, and Runkle v. U. S. (C. C. A. 10th) 42 F.(2d) 804, to the same effect, were decided after the filing of the report. These cases hold that section 200 of the World War Veterans’ Act as amended by the act of 1926 raises the presumption as to the service origin of disability arising from a disease mentioned in the section in favor of a claimant seeking a recovery under a policy, and not merely in favor of a veteran seeking compensation or treatment or the reinstatement of a lapsed policy.

While we have great respect for the courts which have reached this conclusion, we cannot follow them in their interpretation of the statute. Conceding that the presumption as raised under the 1926 amendment is not confined to the purposes of section 200, it is confined to the purposes of the act, which provides for compensation, treatment, and reinstatement of insurance for veterans suffering from disabilities of service origin. It does not provide for the establishment of claims under policies as issued, nor does it attempt to regulate procedure in the courts on such policies. It would seem clear, therefore, that, if we look to the language of the act alone, there is nothing to create such presumption in the ease of a claim under a policy, which is an entirely different matter from compensation or treatment of disabled veterans or the reinstatement of insurance which they have allowed to lapse.

The same result follows if we look to the purpose of the statute and consider, as we must, its reason and spirit. In the case of a claim of disability under a policy, the question is not as to the origin of the disability, but as to whether it was total and permanent within the meaning of the policy while same was in force. The mere fact that it may have arisen from injury or disease having a service origin does not bear upon the right of recovery. The disability must have been total and permanent during the life of the policy, irrespective of the origin of the injury or disease causing it. And, on the other hand, if the disability was total and permanent, it makes no difference that it may not have been of service origin. There could have been no reason, therefore, in providing that, for the purposes of claims under policies, the diseases mentioned in the act should be deemed to have originated in the service. We think it clear that the presumption was intended to relate to matters as to which the service origin of disability was a consideration of importance, that is to applications under the act for compensation or treatment or for reinstatement of insurance.

There was error, therefore, in giving the special instruction requested by plaintiffs; and this error was accentuated when the learned trial judge remarked that under the instruction he could see nothing for the jury to do but find a verdict for plaintiffs. Whatever the origin of the disease causing disability, plaintiffs were not entitled to recover unless the insured became totally and permanently disabled while the policy was in force. As was well said by Judge Wilbur in Evans v. U. S. (C. C. A. 9th) 43 F.(2d) 719: “The appellant’s case did not depend upon the question of the service origin of the disease from which he died, but upon the degree of his disability therefrom. Unless that disability was total and' permanent during the life of. the policy, the appellant could not recover.”

For the reasons stated, there was error in the trial below, and the case must be remanded for a new trial.

Reversed.


text:
    UNITED STATES v. HARRISON et al.
    No. 3103.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.
    Bayless L. Guffy, Atty. U. S. Veterans’ Bureau, of Washington, D. C. (James Damron, U. S. Atty., and Okey Paul Keadle and David F. Sheets, Assistant U. S. Attys., all of Huntington, W. Va., and William Wolff Smith, Gen. Counsel, U. S. Veterans’ Bureau, of Washington, D. C., on the brief), for the United States.
    H. D. Rollins, of Charleston, W. Va., for appellees.
    Before PARKER and NORTHCOTT, Circuit Judges, and GLENN, District Judge.
   PARKER, Circuit Judge.

This is an action upon a war risk insurance policy. The insured was honorably discharged from the navy December 30, 1918. He paid no premiums on his policy after his discharge and the grace period expired February 1, 1919. He died of tuberculosis February 6, 1926. The suit was prosecuted by his administrator and the beneficiaries under the policy on the theory that insured was totally and permanently disabled prior to the expiration of the grace period, and that consequently the insurance never lapsed. There was a verdict and judgment for the plaintiffs, and the government has appealed. The principal exception in the ease relates to the sufficiency of the evidence to sustain the verdict.

We do not think that there was sufficient evidence of total and permanent disability to bring the case within the principles laid down by us in Carter v. U. S., 49 F.(2d) 221, this day decided. There was general testimony on the part of insured’s father and one of his neighbors that his health was not good, that he was complaining, that he could not work much and had lung trouble; but the physician who treated him in his final illness testified that the tuberculosis of which he died was only of several months standing, and there is no evidence that he had this disease or any other disease resulting in total and permanent disability during the greater part of the seven years which intervened between the lapse of his policy and his death. On the other hand, his certificate of discharge from the navy recommended him for re-enlistment; and a physical’examination made at the time of his employment at the Naval Ordnance 'Plant at South - Charleston, W. Va., in the year 1919 showed that he had no “indication of disease or of derangement of functions of respiration” and that, although five pounds underweight, his “degree of robustness” was “good.” The evidence is uneontradieted that he was employed at the ordnance plant as a common laborer on July 11, 1919, at a wage of $3.68 per day; that he continued at that rating until June 15, 1920, when he was appointed a general helper at $4.32 per day, later changed to $4.56 and finally to $3.84 per day under new schedules of wages; that he was discharged at his own request without delinquency or misconduct on July 17, 1922, having been “continuously employed over a period of three years and six days”; and that his efficiency was “very good.”

In the face of this evidence we do not see how the position that insured was totally and permanently disabled on February 1, 1919, can be sustained. As pointed out in the Carter Case, the fact that an insured actually does work, when the evidence shows that he is not able to work, does not preclude his recovering under the policy; but how can it be said that a man is not able to work when he does work under continuous employment for a period of more than three years? It is not satisfactorily established that insured had tuberculosis on February 1, 1919; but even if it be assumed that he had the disease at that time, it does not follow that he was totally and permanently disabled as a result thereof. Whether tuberculosis results in total and permanent disability depends upon the facts of each particular case; and there is no sufficient evidence here of such disability. The learned trial judge was laboring under the misapprehension that tuberculosis contracted prior to January 1,1925, was conclusively presumed to have been contracted in the government service because of the provisions of section 200 of the World War Veterans’ Act, as amended by Act July 2, 1926, § 7 (38 USCA § 471); but, as we have this day decided in the Searls Case, 49 F.(2d) 224, that presumption has no application to a case such as this.

There was error in admitting the death certificate of the undertaker [U. S. v. Blackburn (C. C. A. 9th) 33 F.(2d) 564], and there were certain other errors covered by the exceptions which, in the light of what we have already said, it is not neeessaiy to discuss. For the error in refusing defendant’s motion for a directed verdict, there must be a new trial; and the judgment below will accordingly be reversed.

Reversed.


text:
    UNITED STATES v. RHODES.
    No. 3104.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.

      Okey P. Keadle, Asst. U. S. Atty., of Huntington, W. Va. (James Damron, U. S. Atty., and David P. Sheets, Asst. U. S. Atty., both of Huntington, W. Va., and William Wolff Smith, Gen. Counsel, U. S. Veterans’ Bureau, and C. L. Dawson, Atty., U. S. Veterans’ Bureau, both of Washington, D. C., on the brief), for the United States.
    Roderick G. Merrick, of Charleston, W. Va., for appellee.
    Before PARKER and NORTHCOTT, Circuit Judges, and GLENN, District Judge.
   PARKER, Circuit Judge.

This was an action on a war risk insurance policy tried by the court below without a jury under stipulation of counsel. The court found as a fact that the plaintiff became totally and permanently disabled within the meaning of the policy while same was in force, and rendered judgment in his favor. Prom this judgment the government has appealed, its chief contention being that . there was no sufficient evidence to support a recovery.

It is not necessary to review the evidence. It was sufficient to support the findings of the court under the principles laid down in Carter v. U. S. (C. C. A.) 49 P.(2d) 221, this day decided; and, this being true, the findings will not be disturbed. Harrison v. U. S. (C. C. A. 10th) 42 P.(2d) 736; People’s Bank v. International Finance Corporation (C. C. A. 4th) 30 P.(2d) 46; Keeton v. Jefferson Standard Life Ins. Co. (C. C. A. 4th) 5 P.(2d) 183. The government requested the trial judge to make certain findings of fact; but we must assume that his refusal to make them was based upon the view which he took of the evidence, which, as we have seen, supported the findings made. We have no more power to weigh the evidence and pass upon disputed questions of fact where trial at law is had before a judge than where it is had before a jury; and the fact that the losing party may have requested findings of fact does not add to our power. It is only where there is no evidence to support the findings, and this question is properly raised, that we ean disturb them. We can, of course, always inquire whether the findings made support the judgment; but there is no contention or ground for contention that the judgment here is not supported by the findings.

The government complains of a portion of the findings in which is contained the statement that plaintiff’s tuberculosis was conclusively presumed under section 2001 of the World War Veterans’ Act, as amended by Act July 2, 1926, § 7 (38 USCA § 471), to have been contracted in the army. But while the brief and the assignments of error make complaint of this statement, no exception appears to have been taken to it; and it is elementary that we will not consider an assignment of error unless based upon an exception of record. Even if the assignment of error be treated as an exception, it cannot be sustained, for it embraces, in addition to the statement complained of, a number of other matters, including findings of fact amply supported by the testimony. While we have the power to notice plain error not excepted to, we exercise such power only where to do so is necessary to prevent a miscarriage of justice. A case for its exercise is not presented here; for in view of the judge’s finding as to total and permanent disability, we cannot see that his conclusion as to the service origin of the disease was prejudicial, and the error, even if properly excepted to, should be deemed harmless. See U. S. v. Wescoat (C. C. A.) 49 F.(2d) 193, this day decided.

The judgment below will be affirmed. Affirmed.


text:
    MYERS v. UNITED STATES.
    No. 3107.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.
    J. Raymond Gordon, of Charleston, W. Va., for appellant.
    James Damron, U. S. Atty., of Huntington, W. Va. (Philip Angel, Asst. U. S. Atty., of Huntington, W. Va. on the brief), for the United States.
    Before PARKER, Circuit Judge, and WATKINS and WEBB, District Judges.
   PARKER, Circuit Judge.

The appellant, Roy Myers, was convicted in the court below of selling intoxicating liquor in violation of the National Prohibition Act (27 USCA); and from a sentence of imprisonment he appeals to this court. The assignments of error raise four points for our consideration, viz.: (1) Whether the evidence relied upon by the government established a sale; (2) whether there was error in admitting evidence as to the finding of a quantity of liquor on defendant’s premises in a search made the day after the sale relied on; (3) whether there was error in admitting evidence of the submission of the defendant in the state court under a charge of possessing the liquor found on this search; and (4) whether there was error in the court’s action on objections made to the District Attorney’s argument to the jury.

The facts are that government agents saw one Amos, a taxicab driver working for defendant, bring a package containing a gallon of whisky from the residence of defendant and place it in an automobile. They placed him under arrest, and he was prosecuted and convicted on a charge of transportation. Amos later divulged his connection with defendant; and, upon the trial of the latter, testified to an arrangement under which he (Amos) was to drive a taxicab for defendant and handle liquor for him. He was to obtain this liquor from defendant, was to pay for it at a certain price, and was to retain all above that price that he might receive. He testified that he had been getting liquor and selling it for some time under this arrangement, that on the day in question he had obtained a pint from defendant’s residence which he had sold and delivered, and that, having arranged for the sale of a gallon in the evening, he had obtained it from defendant’s residence, a building used partly for business purposes, and was taking it to make delivery to Ms customer when he was arrested.

Shortly after arresting Amos, the officers who had arrested him obtained a federal search warrant and searched the premises of defendant, but failed to find any liquor there. The next day, state officers, having obtained a state warrant, searched and found forty-three gallons in one-gallon cans hidden in a secret compartment of defendant’s kitchen. A federal agent was with them when they made this search, but defendant was not prosecuted in the federal courts for possession of the liquor so found. Evidence of its being found on his premises was admitted in the trial below, however, in corroboration of the testimony of Amos; and the court also admitted the record of defendant’s submission in the state court to the charge of possessing it. The objection to the remarks of the district attorney was that in Ms address to the jury he referred to the defendant as a bootlegger.

There can be no question that the evidence relied upon by the government supported the charge of sale. If the evidence of Amos is believed, he and the defendant had beep, engaging in business together for a period of a year or more; and, even if Amos be considered as acting as defendant’s agent, defendant would be criminally responsible for the sales made by Amos in that capacity, including the sale of the pint which was consummated by delivery to the purchaser on the day of his arrest. We think, also, that the evidence supports the position that in the ease of the liquor handled by Amos there was a sale to him by the defendant. ' It is true that Amos was not required to make payment at the time that he obtained the liquor; but payment in cash is notneeessary to complete a sale. If liquor was delivered to him by the defendant or at his instance under an arrangement by which payment was to be made later, this would clearly be a sale within the meaning of the statute. The case of Fox v. U. S. (C. C. A. 4th) 34 F.(2d) 99, relied upon by defendant, merely holds that there can be no sale without delivery, either actual or constructive, and is not remotely in point.

There was no error in admitting evidence as to the finding of the forty-three gallons of liquor on defendant’s premises. The fact that the defendant had so large a quantity concealed in a secret compartment strongly supported the government’s contention that he was engaged in the illegal liquor traffic, and corroborated the direct evidence of the government to that effect. Petroff v. U. S. (C. C. A. 6th) 13 F.(2d) 453. F'or like reason, it was proper to admit in evidence that in the state court defendant had pleaded guilty to the possession of the liquor so found.

It is objected that the evidence as to defendant’s possession of the liquor was obtained by means of an unlawful search; the contention being grounded upon the fact that a federal agent was present when the search was made by the state officers under the state search warrant. It is true that, where a f ed- ' eral officer, as a means of evading the limitations of the federal law, participates with state officers in a search wMeh is forbidden by the Constitution and laws of the United States, the evidence obtained thereby will be excluded by the federal courts on the principle that an officer of the government will not be allowed to do indirectly what he may not do directly. Byars v. U. S., 273 U. S. 28, 47 S. Ct. 248, 71 L. Ed. 520; Thompson v. U. S. (C. C. A. 4th) 22 F.(2d) 134, 135. There is nothing in this case, however, to bring it 'within the rule stated. The searching,party had a state warrant, and there is nothing to show that in its issuance any principles of the federal law were violated or that a warrant might not have been obtained from the United States commissioner, as had been done on the preceding day. The crime discovered was made the basis of a prosecution in the state court, and the federal officer present instituted no prosecution in the federal court with regard thereto. The case at bar was a prosecution for a crime committed on the preceding day; and there is no reason why evidence obtained in the search conducted by the state officers should not have been admitted. See Byars v. U. S., supra, 273 U. S. 28 at page 33, 47 S. Ct. 248, 71 L. Ed. 520; Fisher v. U. S. (C. C. A. 4th) 2 F.(2d) 843; Riggs v. U. S. (C. C. A. 4th) 299 F. 273. As said by Judge Soper, speaking for this court in Thompson v. U. S., supra: “The real inquiry, therefore, is whether under the facts of this case the search was in truth a proceeding by the state, or whether, on the other hand, it was an undertaking of the federal prohibition agent to obtain evidence in a manner forbidden by the federal law, and at the same time to avoid the consequences by co-operation with a state officer.” There can be no question that the seareh here complained of was “in truth a proceeding by the state.”

The exceptions to the rulings of the court on objections made to the arguments of the district attorney are without substantial merit. There is nothing in the record to show that the reference to the defendant by the district attorney was made otherwise than as a conclusion from the evidence that he had been guilty of a violation of the liquor laws. The use of epithets by counsel should, of course, not be allowed; but there is no objection to argument that an accused is guilty of crime or of designating the crime of which he is supposed to be guilty. We cannot see from the record that defendant was prejudiced in any way by the argument of which he complains.

There was no error, and the judgment of» the court below will be affirmed.

Affirmed.


author: SIBLEY, Circuit Judge.

text:
    MYLES SALT CO., Limited, v. COMMISSIONER OF INTERNAL REVENUE.
    No. 6050.
    Circuit Court of Appeals, Fifth Circuit.
    April 21, 1931.
    E. Barrett Prettyman and Frederick R. Gibbs, both of Washington, D. C. (Preston B. Kavanagh, all of Washington, D. C„ on the brief), for petitioner.
    G. A. Youngquist, Asst. Atty. Gen., Sew-all Key, Sp. Asst, to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and S. A. Suydam, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., and J. Louis Monarch, Sp. Asst, to Atty. Gen., for respondent.
    Before BRYAN, FOSTER, and SIBLEY, Circuit Judges.
   SIBLEY, Circuit Judge.

The sole question is limitation. On May 16, 1921 (May 15th was Sunday), Myles Salt Company filed its income tax return for its fiscal year ending February 28,1921, and paid the tax shown by it, all according to the Revenue Act of 1918 then in force (40 Stat. 1057). On November 23, 1921, the Revenue Act of 1921 was approved, effective as to its income tax provisions as of January 1, 1921 (section 263), and repealing as of January 1, 1921, the corresponding provisions of the Revenue Act of 1918 (section 1400). No change was made affecting the tax of this taxpayer except that, because its net income exceeded $25,000, it was deprived since January 1st of the credit of $2,000 allowed by section 236 (42 Stat. 257), thus increasing its tax about $35. No new or amended return showing this changed computation was filed or requested. On September 17, 1926, the Commissioner sent out a deficiency notice preparatory to assessing an additional tax arising mainly from corrections in the deductions claimed for depletion and inventory losses. Before the Board of Tax Appeals the taxpayer claimed that the assessment was barred by the provisions then in force of the Revenue Act of 1926, § 277 (a) (2), 26 USCA § 1057 (a) (2), “The amount of income, excess-profits, and war-profits taxes imposed by the Revenue Act of 1921, and by such Act as amended, for the taxable year 1921 * * * shall be assessed within four years after the return was filed.” By section 200 (1) of the Act of 1921 (42 Stat. 227) the taxable year 1921 included fiscal years ending during 1921. The Board held, three members dissenting, that no lawful return had been filed for the fiscal year in question, and no bar had attached because of section 278 (a) of the Act of 1926 (26 USCA § 1058), “In ease of a false or fraudulent return with intent to evade tax or of a failure to file a return the tax may he assessed *' * * at any time.”

The return which will date the beginning of the limitation period, and lack of which will prevent limitation, is one made in substantial conformity to the law which required it. The act of 1918 and that of 1921 in section 239 (40 Stat. 1081, 42 Stat. 259) both require “every corporation «• * * shall make a return, stating specifically the items of its gross income and the deductions and credits allowed by this title. The return shall be sworn to by the president, vice president, or other principal officer and by the treasurer or assistant treasurer.” It is no return as respects limitation if made tentatively and not intended to be the basis of an assessment, Florsheim, Brothers v. United States, 280 U. S. 453, 50 S. Ct. 215, 74 L. Ed. 542; or if not sworn to at all, Lucas v. Pilliod, 281 U. S. 245, 50 S. Ct. 297, 74 L. Ed. 829, 67 A. L. R. 1350. It must purport to cover the entire period involved, and must show the items of gross income, deductions, and credits of the taxpayer with such definiteness as to permit an assessment of the tax, if accepted as correct. ‘ United States v. National Tank & Export Co. (C. C. A.) 45 F.(2d) 1005. Perfect accuracy and completeness is not necessary, for there could rarely be an additional tax assessed except on some correction of the return, and, if the need of correction is held to make it no return, such deficiency assessments would never be barred. If, on the other hand, the return is so false as to show fraud and intent to evade the tax, there is by the special provision above quoted no limitation.

The Board found no fraud or bad intent in this return. If it had been filed or refiled the day after the Act of 1921 was passed, it would have been clearly good; the error in the deductible credit being easily remediable by the Commissioner without further information from the taxpayer. But it is said that, because it was filed before the act was passed, it cannot be a return under the act. The act itself, however, is retroactive, declaring itself to he effective as of January 1, 1921. If in effect on that date for other purposes, why should it not speak from that date as to filing returns? Difficulty can arise only concerning returns for fiscal years ending during 1921. Congress had them in mind, for in section 205 (a) it was provided: “If a taxpayer makes return for a fiscal year beginning in 1920 and ending in 1921, his tax under this title for the taxable year 1921 shall be” arrived at on a basis stated. Entirely conscious, therefore, that such returns had already been filed before the act was passed on November 23d, the only provision Congress made as to filing them was section 227 (a): “Returns * * * shall be made on or before the fifteenth day of the third month following the close of . the fiscal year.” If this requirement is read as of January 1st, the return in question was filed in literal compliance with it. That it was the intent of Congress thus to. ratify and adopt returns filed between January 1st and the passing of the act also appears from its repeal of the former act as of January 1st, so that there was no law except the act of 1921 that could apply to such returns. This intent is further shown by the history of the legislation, for this same situation arose when the Act of 1918, approved February 24, 1919 (40 Stat. 1057), retroactively displaced the Act of 1917. Its section 227 (a) was identical with that just quoted, and was interpreted by Treasury Decision 2797, whereby fiscal year returns filed before the act was passed were treated as sufficient, and were referred to as the “original return,” but, if an additional tax was due under the new act, ' “a return covering such additional tax” only > was required, and called an “amended return.” Thus in no case was the original return treated as a nullity, but as valid so far as it went. By a settled principle Congress is to be considered as having adopted this official construction when it re-enacted the same words in the new law. United States v. G. Falk & Bro., 204 U. S. 143, 27 S. Ct. 191, 51 L. Ed. 411; Stairs et al. v. Peaslee, 18 How. 521,15 L. Ed. 474. Many decisions of the Board of Tax Appeals have held that returns filed before the law was passed are not nullities, but sufficient to date the beginning - of limitation if no additional tax .was imposed on the particular taxpayer by the law, although the return was actually incorrect and the tax paid insufficient. Ley & Co. Inc., 9 B. T. A. 749; Palmetto Coal Co., 11 B. T. A. 154; Denholm & McKay Co., 15 B. T. A. 225. This return was retained by the Commissioner, together with the money paid on it. An audit of it was had in 1923 without request for any amendment of it. The deficiency letter of September 17, 1926, states that “an audit of your income and profits tax return for the fiscal year ended February 28,1921, has resulted,” etc., and the statement attached is based upon the figures of the return; so that the additional tax is proposed to be assessed on the return. These things are mentioned, not as raising an estoppel to deny that it is a return, but as further tending to show that it was treated in administrative practice as, and understood to be, a duly filed return and practically sufficient as such until the question of limitation. was raised. We hold that limitation is to be dated from its filing on May 16, 1921. We do not inquire whether the tax for the period prior to January 1, 1921, which is by Act of 1921, § 205 (a), to be measured by the provisions of the Act of 1918, is imposed by the one act or the other, since the limitation period applicable to either had expired when the assessment was attempted. The entire assessment is barred.

The petition for review is granted, and the. case is remanded for further proceedings not inconsistent herewith.


text:
    LUCAS, Commissioner of Internal Revenue, v. COLMER-GREEN LUMBER CO.
    No. 6060.
    Circuit Court of Appeals, Fifth Circuit.
    April 30, 1931.
    G. A. Youngquist, Asst. Atty. Gen., J. Louis Monarch and Sewall Key, Sp. Assts. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Stanley Suydam, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., and Norman D. Keller, Sp. Asst, to Atty. Gen., for petitioner.
    Before BRYAN, SIBLEY, and HUTCHESON, Circuit Judges.
   SIBLEY, Circuit Judge.

The sole question is whether an additional tax for the calendar year 1919, proposed to be assessed against Colmer-Green Lumber Company by a deficiency letter from the Commissioner, dated September 2, 1926, was barred by limitation. The Revenue Act of 1926, § 277 (a), 26 USCA § 1057 (a), then in force, required assessment “within five years after the return was filed.” On May 15, 1920, a return was filed which it is claimed was sufficient to date the beginning of the limitation. It does not, however, profess to be a separate return for this taxpayer, but a consolidated return for it and another corporation in which it owned stock. The re-turn did not set forth anywhere the items of gross income, deductions, and credits of the separate corporations, nor even the separate net income of each, but only aggregations of such items for both. It would have been wholly impossible to tell from it what this taxpayer’s gross or net income was, or to assess any tax against it. The return did not comply with section 240 (a) of the Revenue Act of 1918 (40 Stat. 1081) touching consolidated returns, and article 637 of Regulation 45 made thereunder, in that the items of gross income and deductions for each corporation involved were not set down in coltimnar form, so as to be readily audited, and so that, after the consolidated tax was computed, it could be apportioned for assessment between the two according to their several net incomes, the return disclosing no agreement between them about the division. It was determined that separate returns should have been filed, and there is now no contention that the consolidated return was justified, although the Board finds that it was filed in good faith. On December 15, 1921, a separate return was filed which for the first time disclosed the separate gross and net income of this taxpayer. On that date we think limitation began to run. Section 239 of the Revenue Act of 1918 (40 Stat. 1081) required every corporation to “make a return, stating specifically the items of its gross income and the deductions and credits allowed by this title.” This information is essential to an assessment of the tax, and to procure it is the object of requiring the return. A paper which does not purport to give it cannot be considered to be a return in substantial conformity to the law requiring it. “In providing that the period of limitation should begin on the date when the return was filed, rather than when it was due, the statute plainly manifested a purpose that the period was to commence only when the taxpayer had supplied this information in the prescribed manner.” Florsheim Brothers Co. v. United States, 280 U. S. 453, 460, 50 S. Ct. 215, 217, 74 L. Ed. 542; Myles Salt Co. v. Commissioner, 49 E.(2d) 232, decided by this court April 21, 1931; United States v. National Tank & Export Co. (C. C. A.) 45 E.(2d) 1005. Had the consolidated return given the separate gross income and deductions and credits for each company involved as under the Regulation it should have done, a different case would be presented. See F. A. Hall Co., Inc., 3 B. T. A. 1172; Matteawan Mfg. Co., 4 B. T. A. 953. Wholly failing to do this, it cannot be considered a return filed by or for this taxpayer. The deficiency letter was issued within five years from the time of filing of this taxpayer’s earliest return. The assessment was not barred.

Reversed and remanded for further proceedings.


author: VAN VALKENBURGH, Circuit Judge.

text:
    PEIGHTEL et al. v. UNITED STATES.
    No. 9014.
    Circuit Court of Appeals, Eighth Circuit.
    April 16, 1931.

      Leslie J. Lyons, of Kansas City, Mo., and Frank B. Williams, of Springfield, Mo. (Donald E. Lyons, of Kansas City, Mo., on the brief), for appellants.
    William L. Vandeventer, U. S. Atty., of Kansas City, Mo.
    Before KENYON and VAN VALKENBURGH, Circuit Judges, and DAVIS, District Judge.
   VAN VALKENBURGH, Circuit Judge.

Appellants were president and cashier, respectively, of the New First National Bank of Springfield, Mo. Jointly with the vice president and four directors of the bank, they were indicted in the District Court for the Southern Division of the Western District of Missouri, charged with violating and conspiring to violate section 5209, Rev. St. U. S., as amended (12 USCA § 592). The indictment contained ten counts. The first nine counts charged substantive offenses of alleged willful misapplication of the moneys and funds of said banking association. The tenth count charged conspiracy to commit these substantive offenses. The misapplications charged were in substance the withdrawal of funds of the New First National Bank and the application thereof to the payment of interest and installments of principal upon a certain promissory note, dated February 8,1926, for the principal sum of $95,000, payable to George B. McDaniel and H. B. McDaniel, acting as trustees for the Springfield Clearing House Association, and signed by the defendants named in the indictment. The trial of the case resulted in the conviction of the president, vice president, and cashier, and the acquittal of the other directors. The vice president, Eslinger, was fined and the fine was paid. A sentence of three years in the penitentiary was assessed against President Peightel,’ and of eighteen months against Cashier Davis, appellants herein.

The contention of the government is that the $95,000 note was the obligation of the individual makers, and that funds of the bank were unlawfully applied upon the payment of their individual indebtedness. That of appellants is that this note was in fact primarily the obligation of the bank, the signers being merely accommodation makers or guarantors; that, for this reason, the funds of the bank were properly used in making the payments charged. Counsel for the government concedes that “if this were an obligation of the bank, then the whole case falls because the bank would certainly have a right to apply its assets on its own obligation.” This consideration, then, forms the basis of this appeal, all other questions being subsidiary thereto.

The execution of the note in question arose out of the following circumstances: The Bank of Greene County was a state bank doing business in Springfield, Mo., and, about February 1, 1926, the state commissioner of finance caused to be made an audit and examination of its affairs. This was conducted by one Charles L. Bollinger, deputy commissioner, residing in Springfield. He discovered that certain assets of the Bank of Greene County must be replaced by money or approved securities or the bank must be closed. Apparently the Bank of Greene County, through its officers, directors, and stockholders, was unable or unwilling to make the replacements demanded, and its failure, therefore, became imminent. On just what precise date this situation became known to the Springfield Clearing House Association, representing the banks of Springfield, is not made clear by the record, and is perhaps not of serious importance. There had been two recent and disastrous failures of Springfield banks, from the shock of which that community had not fully recovered, and there was great natural anxiety on the part of the Clearing House and others to avoid a recurrence of like nature.. Mr. Bollinger completed his examination on Saturday, February 6, 1926. The condition of the Bank of Greene County may have leaked out to the officers of the Clearing House a day or two before this, but certain it is that on the evening of February 6th a conference was held at Mr. Bollinger’s residence, at which Mr. French, the state commissioner of finance, the president, and some other members of the Clearing House Association, and various officers of the Bank of Greene County, were present. The problem was to discover some means by which the threatened bank failure could be averted. From some source came the suggestion that the assets of the Bank of Greene County should he purchased and taken over by the New First National Bank. Mr. Peightel, the president of the latter bank, was called in. Bollinger says “he was there later in the night I believe. He wasn’t there at the original conference.” Of course terms acceptable to the New First National Bank had to be agreed upon — terms upon which .it could afford to take over the assets and liabilities of a failing bank without jeopardizing its own financial stability. The problem presented was not to rehabilitate the Bank of Greene County, which was going out of business, but rather to formulate terms safe and acceptable to the purchasing bank. Conferences to this end continued throughout the following day, Sunday, and until late into Sunday night. Among the assets of the Bank of Greene County were $115,000 in notes, described as “slow.” Mr. George B. McDaniel, president of the Clearing House Association, testified that he “figured” that $20,000 to be contributed by the Clearing House “would take care of any loss in handling the $115,-000.00 of paper.” Late Sunday night, or, rather, early Monday morning, final terms were agreed upon. The board of directors of the Bank of Greene County adopted a resolution empowering its officers to sell all its assets of every kind and character to the New First National Bank. A resolution of the latter bank authorized the purchase of all the assets of the Bank of Greene County, and the assumption of all its liabilities except those due to stockholders by reason of capital stock, undivided profits or surplus, or unpaid dividends. A contract pursuant to these resolutions was executed. The Clearing House Association agreed to contribute $20,000 and to make a loan of $95,000 to be evidenced by a note signed by the officers and directors of the purchasing bank, and secured by the aforesaid notes aggregating $115,000 as collateral thereto. In addition, property statements were required of and given by the makers. The $95,000 note was made payable to George D. McDaniel and H. B. McDaniel, leading Springfield bankers, as trustees for the Clearing House Association, in conformity with a trust agreement of even date. All the assets of the Bank of Greene County were delivered to the New First National Bank, including the $115,000 in notes, later deposited as collateral to the $95,000 note. Clearing House cheeks for $20,000 and $95,000 received the indorsement of the New First National Bank, and their proceeds were received and used by the New First National Bank in meeting the demands of its customers and those of the Bank of Greene County which it had absorbed. None of the proceeds of these checks were received by the makers of the $95,000 note. All the transactions above recited took place on Monday, February 8th, following- the conferences and agreements to which reference has been made.

The New First National Bank of Springfield, Mo., failed to open its doors for business March 17, 1928.' A receiver, appointed by the Comptroller of the Currency, took charge of the bank April 13, 1928. This indictment was returned March 5,1929.

The assignments of error specify:

1. The action of the court in overruling motions to quash. Conceding, without deciding, that a motion to quash can perform the office of a demurrer with respect to the matters therein stated, it is our opinion that the indictment is not vulnerable to attack by these motions, and that they were properly overruled.
2. The admission of evidence in the course of the trial as follows:
(a) The reports of the bank to the Comptroller of the Treasury which failed to show the $95,000 note as an obligation of the bank. These reports were properly admitted as hearing upon the question of ’whether this was or was not an obligation of the bank. The failure so to report this obligation was not charged as an offense against appellants in this indictment and could not be considered as an offense in this prosecution. An appropriate instruction to this effect should have been given if requested. In our opinion the request made was unfortunately framed.
(b) Admission of the testimony of H. B. McDaniel, president of the Clearing House Association, as to his understanding regarding the loan of $95,000:
“Q. (By the District Attorney) What is your understanding regarding this loan of the $95,000.0.0?”

Objections of counsel for appellants were overruled and exceptions saved.

“The Court: Just state his understanding. You may proceed with .the answer. Objection overruled and exception allowed to defendants.

“A. We loaned the money to all the individuals to take up the notes regarded by the State Banking Department as questionable and to make the Greene County Bank solvent so it could pay its depositors dollar for dollar.”

This witness had repeatedly stated that he had no communication with the officers and directors of the New First National Bank or any of them at. any time in the course of the negotiations, and therefore had no'personal knowledge of the agreements made. His testimony respecting his “understanding” under the circumstances was incompetent in any view and its admission was erroneous.

(e) Character witnesses for the defense were repeatedly asked whether they did not know that some of the defendants, particularly the defendant Peightel, was indebted to his bank in a substantial sum at the time the bank closed. This fact, if it was a faet, was proof in this case neither of bad character, nor of guilt of the offenses charged. It is true that no such knowledge on the part of the-witnesses was elicited, but the questions were objected to as prejudicial and the objections should have been sustained. Later appellants requested the following instruction : “The court instructs the jury that the faet, if you find it to be a faet, that either of the defendants was indebted to the New First National Bank at the time its affairs were placed in the hands of a receiver, is not, of itself, any evidence that such defendant is guilty' of any crime charged in the indictment.”' The •instruction requested was refused.^ We think; under the circumstances, it should have been given.

(d) The admission of Government’s Exhibit 86, “Totals below to be used in consolidation Bank of Greene County 2-^-6 — 26.” The foregoing words were shown to be in the handwriting of appellant Peightel. The exhibit was .introduced to show that $115,000 in cash was apparently listed among the resources Of the Bank of Greene County. It was explained that these figures do not appear in the books of the Bank of Greene County, but on a memorandum sheet pasted in the bank of thht' bank’s daily statement, which memorandum was prepared after the merger had taken place. We do not think it was error to admit this exhibit in evidence, but its importance is negligible in view, of the indisputable faet. that the. entire* ¿mount contributed, and loaned by''the Clearing House went into the New First National Bank on the morning of February 8th.

3, Error is assigned to the refusal of certain requested, instructions dealing with the nature of accommodation,makers, and with the intent and good faith.of appellants. It is complained that the court erred in its statement to 'the effect that mismanagement or maladministration does not constitute the crime of misapplication. We cannot agree •with' these criticisms. ’ We think the court’s charge quite fully, and to the understanding of the jury, covered all these points. It is possible the statement might properly have been more explicit in some particulars, but such exceptions as were timely made were met to the satisfaction of counsel according to the record, and no error can well be predicated upon the affirmative charge of the court.

4. We come now to the most serious question presented by the assignments of error. It is earnestly insisted that there is no substantial evidence to support the verdict and judgment, and that in the entire record there can be found no substantial evidence that is not consistent with the innocence of the accused. At the close of all the evidence appellants interposed demurrers, filed motions for directed verdicts, and requested the court to instruct the jury to acquit. All these tenders were overruled and denied, and exceptions were-allowed.

Government counsel in his brief enumerates twelve so-called “facts showing, the $95,-000.00 note was a personal obligation.” They are the following:

“No. 1. The note given by the defendants in no way indicates that it was an act of or for the benefit of the New First National Bank, but on its face shows it was an individual act.
“No. 2. The trust agreement does not mention or even intimate that it is an act of the New First National Bank or for the benefit of the New First National Bank, but shows oh its face that it was a personal transaction.
“No. 3. George D. and H. B. McDaniel testified that the $20,000.00 donated and the $95,000.00 loaned were for the purpose of taking up the worthless and questionable paper in the Greene County Bank to make that institution solvent. .
“No. 4. The daily statement of the Greene County Bank as of February 6, 1926, includes the item ‘115,000’ under the heading ‘cash’ as assets of the Greene County Bank.
“No. 5. The list prepared by defendant Peightel and designated ‘Totals to be used in the consolidation Greene County Bank’ includes the following item: ‘Cash, C/H Cks. 1 115,000.00’
“No. 6. The notes when turned over to the trustees for the Clearing House as collateral to the $95,000.00 note were delivered by Mr. H. D. Silsby, Cashier of the Greene County Bank, and Mr. Bollinger-, a state bank examiner, an officer and an examiner of the Greene County Bank, and in no way connected with, the New First National Bank.
“No. 7. The books of the New First National Bank show the receipt of $115,000.00 in cash on February 8, 1926, but nowhere do these books reflect the receipt of the notes that were put up as collateral to the loan.
“No. 8. The note of $95,000.00 was never carried upon the books of the New First National Bank as a liability of that institution.
“No. 9. After the consolidation of these banks, reports were made to the Comptroller of the Currency as to the condition of the banking institution on the following dates: April 12, 1926, June 30, 1926, December 31, 1926, March 23,1927, June 30,1927, October 10, 1927, December 31, 1927, each of which were signed by both defendants Peightel and Davis and sworn to as being correct and in none of these reports do they mention as a liability of the New First National Bank, the $95,000.00 note.
“No. 10. Numerous printed statements were gotten out. for their customers and for the public generally, were distributed at the bank and printed in the papers after consolidation and before failure and none of them listed as a liability of the hank the $95,000.00 ■note to the trustees for the Clearing House.
“No. 11. In 1926, Louis B. Elkins, a National Bank Examiner, examined the New First National Bank at Springfield, Missouri, this being the first examination after consolidation.
“He discovered that interest was being paid upon the $95,000.00 note from the assets of the bank. He called the directors’ attention to this matter and they assured him that this note was a personal matter and that while they had paid interest on the note out of the bank’s assets they had collected interest on the notes and deposited it in the bank, of sufficient amount to cover the amount taken out and they promised to make an adjustment entry of this matter.
“No. 12. The resolution of the New First National Bank signed by each of the defendants in this case, dated February 8,1926, did not mention any loan being made to the New First National Bank or for its benefit although it discussed and gave permission for the proposed merger.”

Numbers 1, 2, 8, 9, 10, and 12 of these enumerated facts may be considered together. It is not at all uncommon, as numerous decisions in' this and other courts attest, for a bank obligation to be carried in the name of officers and. directors. In such eases the true nature of the transaction is rarely, if ever, disclosed in the books of the hanking association, in the instruments evidencing the debt, or in reports to the comptroller. There is, therefore, in the form of the $95,000 note, in the recitals of the trust agreement, and of the resolution of the New First National Bank authorizing the purchase, nor in the failure to list this note as a hank obligation upon the books of the bank, in reports to the comptroller, and in public printed statements, nothing necessarily inconsistent with the fact that the note was primarily the obligation of the bank. It is not unnatural that, in their contact with the bank examiner, soon after the consolidation as detailed in faet No. 11, the directors would have maintained an attitude of harmony with the apparent nature of the transaction.

Taking up Nos. 6 and 7, it is to be noted ■that Mr. Silsby, the former cashier of the Bank of Greene County, was to become vice president of the New First National Bank contemporaneously with the purchase or consolidation, and that Mr. Bollinger, as deputy state bank examiner, was interested in the financial stability of the completed transaction between the two banks. In no sense can he he.considered the exclusive representative of the Bank of Greene County. It conclusively appears that the New First National Bank purchased all the assets of the Bank of Greene County, which would include the $115,000 notes, and that these notes found their way into the New First National Bank on the morning of February 8th. That they were subsequently delivered by Silsby and Bollinger as collateral to the $95,000 note has no significance, nor has the fact, in view of this circumstance, that their receipt was not reflected in the books of the New First National Bank.

Numbers 3, 4, and 5 seek to establish that the $115,000, composed of the Clearing House checks for $20,000 and $95,000, went into the Bank of Greene County, for the purpose of taking up its worthless and questionable paper; therefore, that the loan of $95,-000 was not an obligation of the New First National Bank. We have already stated our view of the negligible importance of the list prepared by appellant Peightel designated “totals below to be used in consolidation Bank of Greene County,” and respecting the competency of the “understanding” of H. B. McDaniel as to the object and purpose of the $95,000 loan. It is true that George D. McDaniel testifies that the loan was made to the individual defendants, but he also stated that he considered that the $20,000 contributed by the Clearing House would take care of any loss in handling the $115,000 of paper. Of course, it is apparent that the New First National Bank was to handle this paper, and that the Bank of Greene County was not to reopen. The contention that the money of the Clearing House, aggregating $115,000 advanced and loaned, was to go to the Bank of Greene County to render it solvent and enable it to pay its debts dollar for dollar is a pure bookkeeping fiction. The New First National Bank assumed the payment of these debts by the terms of its purchase, and this money necessarily was turned over to it as an inducement to make that purchase, and to enable it to discharge its assumed obligations. That money went into the coffers of the New First National Bank. None of it was received and enjoyed by appellants. Why, then, did the officers and directors execute this note, if it was primarily the obligation of the bank? It may have been thought unwise that the bank, being a new'banking association, should appear as a borrower from the Clearing House to this extent. It is certain that the officers of the Clearing House desired the personal security exacted. They wanted all the security they could get. Without doubt the makers of the note were individually bound, even though the note was primarily the debt of the bank. But it is suggested that the makers of the $95,000 note gave it in purchase of the $115,000 notes as a business venture. This, in view of all the circumstances, seems untenable. The notes were admittedly slow at best. George B. McDaniel concedes that $20,000 was required to take care of losses in handling them. Later he testified that he didn’t think $20,000 was enough to take care of such losses. But why did this sum find its way into the New First National Bank, if that bank was not a party to this transaction? H. B. McDaniel testifies that he had investigated the condition of the assets of the Greene County Bank “far enough to know we didn’t want anything to do with them”; that it would take $115,000 to make that bank solvent. This was due to the character of the $115,000 notes which the government contends the makers of the $95,-000 note bought as a business venture. Later, in a letter demanding the balance due on this note from the officers ,and directors of the New First National Bank, this same witness, H. B. McDaniel, one of the Clearing House trustees, said in a letter addressed to the seven defendants below: “At a meeting of all the member banks of the Clearing House Association, a few days ago, it was unanimously decided that you as endorsers should be notified that prompt payment is expected. The trustees have had every desire to be considerate to the guarantors of the paper and we feel that the Clearing House Banks of Springfield are entitled to the thanks of the guarantors in the transaction.” [7] It is conceded that the writer referred to the New First National instead of the Savings Bank. Of course the testimony of the defendants below overwhelmingly tends to prove that the $95,000 note was primarily a bank obligation; but, in this analysis, we have confined ourselves to evidence brought out by the government witnesses, and in the presentation of the government’s case. We do not consider the showing made by the defense. In such case, when the circumstances relied upon are as consistent with innocence as with guilt, they are robbed of all probative value. Tingle v. United States (C. C. A. 8) 38 F.(2d) 573; Turinetti v. United States (C. C. A. 8) 2 F.(2d) 15; Gold v. United States (C. C. A. 8) 36 F.(2d) 16, 33.

“Trial judge, unless there is substantial evidence excluding every other hypothesis but that of guilt, has duty of instructing verdict for accused.” Read v. United States (C. C. A. 8) 42 F. (2d) 636; Spalitto v. United States (C. C. A. 8) 39 F.(2d) 782.

It is to be noted that the record satisfactorily fails to show any purpose or intent on the part of appellants and their associates, four of whom were acquitted, to defraud the bank. Such a purpose could be inferred only from the assumption that the makers of the $95,000 note bought this paper aggregating $115,000 for profit as a personal business venture. Under all the circumstances of this ease we do not regard that assumption worthy of serious consideration. It must be conceded that this paper was regarded as worth at least $20,000 less than face value. And the $20,000 contributed to meet that anticipated deficit went to the New First National Bank —ultimately in any view. Doubtless, at the time of the so-called merger it was thought that the net result of the enlarged business would be profitable to the New First National Bank. Under such circumstances, officers and directors frequently lend their credit to the bank to enable it to finance the undertaking. Where public sentiment has been aroused by repeated losses from bank failures, trivial circumstances are frequently given undue weight. In such case relatively slight irregularities in the course of trial may control the issue.

What we have said is not to be construed as in approval of indirection in banking methods, nor of conduct which leads to relaxation of supervision and to dissipation of the funds of a bank with resulting loss to its patrons. We have addressed ourselves to the specific offense charged, and to the evidence relied upon to sustain the prosecution. We have held that where a defendant loans his personal credit to a bank to assist it in obtaining a loan, the proceeds of which go to the credit of the bank and are used for its benefit, the evidence is ordinarily insufficient to take the ease to the jury in a prosecution for misapplying the funds of the bank used in discharging the obligation created by the loan. Long v. United States (C. C. A. 8) 24 F. (2d) 946. We think this ruling applies to the case at bar, that there was no substantial evidence to support the charge of misapplication, and that the demurrers to the evidence and the motions for directed verdicts should have been sustained. Inasmuch as the case must be tried anew, we have discussed questions raised on this appeal in rather more than usual detail.

It results that the judgments below must be reversed, and the ease remanded for a new triaL