author: HICKENLOOPER, Circuit Judge.

text:
    MERIT OIL EQUIPMENT CO. v. FRY EQUIPMENT CORPORATION et al.
    No. 5419.
    Circuit Court of Appeals, Sixth Circuit.
    April 10, 1931.
    Lynn A. Williams, of Chicago, Ill. (Thomas H. Sheridan and Williams, Bradbury, McCaleb & Hinkle, all of Chicago, Ill., on the brief), for appellant.
    C. L. Byron and H. M. Huxley, both of Chicago, Ill., for appellees.
    Before DENISON, MOORMAN, and HICKENLOOPER, Circuit Judges.
   HICKENLOOPER, Circuit Judge.

The defendant below appeals from a decree finding valid and infringed claims 7, 8, 9, 13, 14, 15, 16, and 19 of patent No. 1,635,115, for an apparatus for cleaning containers and the like, issued July 5,1927, upon application of Leo Deutseh and another. With the development of a need for a service station unit for cleaning transmission, crank, and differential-gear casings upon automobiles, by flushing with kerosene or other grease solvent, a number of applications were filed for patents upon devices of this general nature. Few of them were of practical utility. Deutseh conceived the idea that such a device, to be serviceable, must be compact and light, to facilitate -handling, and that provision must b'e made for a continuous circulation of the cleaning fluid, that is, that there must be both a flushing and a suction conduit, drawing the cleansing fluid from a portable tank and returning it to the same container after it had passed through the casing to be cleaned. Thus the same fluid could be used over and over again, provided proper means were installed for straining it upon its return to the main source of supply. It was this concept which underlay his advance step in the art.

Deutseh accomplished his purpose by an exceedingly ingenious combination of mechanical elements. To avoid a duplication of pumps he utilized the ejector principle, carrying part of his main stream through a flushing hose to the gear casing to be cleaned, and using another part to produce suction in the other conduit. The problem of continuous circulation of the cleaning fluid from supply reservoir, to the easing, and back to the reservoir, was solved. By this device he also prevented particles of hard substance passing through the pump and injuring its parts, and by placing a valve-controlled nozzle at the end of the flushing hose the supply of cleaning fluid to the casing could be shut off without stopping the pump or the suction; and so his device was capable of entirely withdrawing the cleaning fluid from the easing after the operation was completed. The single pump was carried by the head of a barrel-like tank, from the bottom of which upper head was depended a basket-type strainer into which the suction hose discharged. To keep the strainer clean Deutseh provided that the stream from the suction conduit should play against the vertical side of the strainer, thus continually washing it off and causing the solid matter “to be deposited at a point away from said strainer.”

Claims 7, 8, 9, 13, 14, 15, and 16 are all built around this above-mentioned method of keeping the strainer clean by discharging the returning liquid against its side. In none of them, excepting possibly claim 14, is the true nature of the advance step disclosed or emphasized — the compactness of the unit, the single pump, and the cycle of the cleaning fluid. True, several of these claims call for most of the separate elements of the combination, such as the tank, the pump, the suction conduit, the strainer, and, in claim 14, broadly, “means whereby cleaning liquid may be supplied from said tank to the casing to be cleaned,” but each contains the element, in a variety of modes of expression, that the strainer shall be “so arranged that the material from said (suction) conduit will be discharged against the strainer for keeping the latter clean and the solid matter will be deposited at a point away from the strainer.” Claim 7. Whether these elaims are to be considered as descriptive of a new machine, in its entirety or as an article of commerce, or as calling for a combination of mechanical elements co-operating to produce a result never before attained in a single machine, the call for an arrangement or organization of the discharge end of the suction hose and the strainer, whereby the returning fluid is used to keep the strainer clean, forms a descriptive feature of the machine, or an essential. element of the combination, without which another’s device would not infringe.

We do not find this element in the alleged-infringing device of the defendant. In the defendant’s device the suction hose discharges below the normal operating level of the cleaning fluid. The basket strainer is enlarged and cylindrical in shape, so that its flat base extends further toward the bottom of the tank. Gravity is relied upon to deposit the hard matter at the base of the cylinder or basket, but this obviously requires that the stream of returning fluid discharged from the suction conduit shall not continually stir up such hard particles. Accordingly, the defendant provided a simple baffle-plate below the discharge orifice to deflect or break the force of the stream. The function of this baffle-plate, however, is not to wash off the strainer nor to assist in depositing solid matter at a point away from the strainer. It does not so operate. Its function is solely to avoid agitation of that which has already settled by gravitation. We are of the opinion that in so far as the means disclosed for keeping the strainer clean is of the essence of the inventive step, even though of but one element of the machine or combination, the patentee may not claim any, all, and every means for accomplishing the desired result. See Davis Sewing Machine Co. v. New Departure Mfg. Co., 217 F. 775, 782, et seq. (C. C. A. 6); Heidbrink v. McKesson, 290 F. 665, 668 (C. C. A. 6); and compare Holland Furniture Co. v. Perkins Glue Co., 277 U. S. 245, 256, 48 S. Ct. 474, 72 L. Ed. 868. Construed in the only way by which it is possible to sustain them, that is, as calling for the particular means disclosed by the patentee, they are not infringed by defendant’s baffle-plate organization which is in no sense an equivalent. Claims 7, 8, 9, 13, 14, 15, and 16 must therefore be held not infringed, and the decree below must be reversed to this extent.

This brings us to a consideration of claim 19, printed in the margin. This claim is accurately descriptive of the patentee’s device and unambiguous. Construed in the light of .the specification it clearly calls for (1) a pnmp, that is, a single pump for operating both flushing and suction conduits, and thus possibly by necessary implication requiring use of the ejector principle; (2) a suction, line; (3) a pressure (or flushing) line; (4) means for selective use of either suction or pressure line — -the valve-controlled nozzle or any valve in the pressure line beyond the ejector; and (5) the strainer; all so organized as to permit the “circulation” and reuse of the cleaning fluid.

It is not contended that this claim does not read directly upon the defendant’s device, or that the various elements do not constitute a true combination, as distinguished from an aggregation. The sole defenses as to it are anticipation and want of invention in view of the prior art. We find nothing precisely anticipatory in the patent references. Anderson, in his . patent No. 1,549,952, August 18, 1925, used two tanks, forcing the liquid from one by compressed air and drawing it into the other by suction. At the end of the operation the cycle of compressed air was reversed and the cleaning fluid was redelivered through a strainer into the original tank from which it had been withdrawn. This .device lacked many of the points of utility .disclosed by Deutseh, the most notable being a complete lack of continuous circulation of .the cleaning fluid during any length of operation. This circulation of the cleaning fluid is also clearly absent in, the device of Maker, patent No. 1,506,652, August 26, 1924, notwithstanding that the gear casing being once filled, that- small portion of the supply could be circulated from the casing, through the •pump, and, -back to the easing, by the turning óf a valve to- jshange the intake from the supply tank ito an outside hose or conduit. Osborne, patent No. 1,633,283, June 21, 1927, has the single portable tank but a reversible pump by which the cleaning fluid is first forced under pressure into the gear casing, thence drains into a separate catch-basin or receptacle and is subsequently,, by reversing the pump, sucked back into the supply tank. In none of these do we find an even close approximation of the concept of Deutseh.

Menge, patent- No. 1,552,998, September 8,1925, had two pumps, one for pressure and one for suction. The marked disadvantage of this is that particles of grit and hard, solid matter are continually passing through the suction pump to the possible damage of its parts. The device also lacks the compactness, simplicity of design and operation, and the general utility of Deutseh. We have no hesitancy in holding that the reduction in the number of working parts of the device of the patent in suit, and the compactness achieved by this and by the use of the ejector principle to produce suction, were features of advance over Menge and entitled to recognition as such, although Menge is perhaps the closest reference in the prior art.

In the related arts, the closest reference is that to Cartwright, patent No. 1,331,239, for a portable pumping apparatus. This device has many of the mechanical features employed by Deutseh but is to be regarded primarily and essentially as a pumping device. The function of cleaning comparatively small gear casings by continuous circulation through them of a cleaning fluid was not, we think, even contemplated, notwithstanding the pressure chamber between the pump and the injector used to produce suction is equipped with a “distributing union” to which a number of hoses may be coupled “so that they may be utilized as desired.” Cartwright could readily be reorganized to anticipate Deutseh, but in this reorganization and in the application of the device to a use for which -it was not originally intended and which was practically impossible without reorganization, we would find the exercise of invention. Without sueh reorganization Cartwright would not anticipate. Compare Gordon Form Lathe Co. v. Walcott Mach. Co., 32 F.(2d) 55, 58 (C. C. A. 6), and eases there cited.

Nor do we think that it required only mechanical skill to combine the various elements (admittedly all old) by which Deutseh accomplished his end. Others were groping in the same direction, but it remained for him to definitely solve the problem.- This is an indication of the exercise of more than mechanical skill. It is contended that the device of the patent lacked utility, in that its first commercial embodiments were inefficient, but whether the defect was due to the type of pump used, as one witness testifies, or to some other detail, it is not inherent in the invention itself. It would indeed be strange if no change of detail were to result from commercial production, or if improvement in efficiency of organization or manufacture, without departure from the original concept of the inventor, were to destroy the patent. Structures later built well within the calls of claim 19 had a good measure of commercial success. The defendant has accorded the patent the tribute of imitation, its device differing from the patented device only as to details not covered by claim 19, and we think that it cannot be said either that invention was wanting or that the device lacked sueh utility as was necessary for a finding of patent validity.

The decree of the District Court finding claim 19 valid and infringed is affirmed. Neither side will be awarded costs in this court.

       19. A motor vehicle service station unit for cleaning gear casings and the like comprising a pump, a suction line and a pressure line connected to saidl pump for circulating a cleaning fluid through the casing to be cleaned, means for selectively using either the suction line or pressure line, and means for separating any solid matter removed from said casing with said cleaning fluid.


source: Caselaw Access Project

author: HICKS, Circuit Judge.

license: Public Domain

text:
    GARDNER v. GRAND BEACH CO. et al.
    No. 5737.
    Circuit Court of Appeals, Sixth Circuit.
    April 10, 1931.
    E. W. Froehlieh, of Chicago, Ill., for Gardner.
    M. M. Uhl, of Grand Rapids, Mich., for Grand Rapids Trust Co.
    Charles S. Abbott, of Detroit, Mich., for Grand Beach Co. and others.
    Travis, Merrick & Johnson, of Grand Rapids, Mich., and A. S. & E. W. Froehlich and Edmund W. Froehlich, all of Chicago, Ill., for appellant.
    Sempliner Dewey, Stanton & Bushnell, Edward R. Stanton, and Charles S. Abbott, all of Detroit, Mich., for appellees.
    Before MOORMAN, HICKS, and HICKENLOOPER, Circuit Judges.
   HICKS, Circuit Judge.

The original bill sought to foreclose a mortgage securing a bond issue of the Grand Beaeh Company. Various phases of the ease have heretofore been before this court [See 29. F.(2d) 481; Id. 34 F.(2d) 836.] The defendants now appeal from a decree of foreclosure and sale and also from an order directing the receiver to pay certain taxes, interest, and insurance and allowing it to borrow money with which to defray certain administration expenses. Plaintiff appeals from so much of the foreclosure decree as compels it to forfeit all interest upon its bonds upon the ground of usury. After said appeals were perfected, but before the record was filed here, plaintiff and .defendants stipulated for a settlement. of the litigation, which stipulation, with an amendment thereto, the District Court, upon the ground that it was then without jurisdiction of the case and for other reasons, declined to recognize. Therefore defendants petitioned this court to compel the District Judge by mandamus proceedings to confirm and enforce said stipulation by appropriate orders and decrees, which petition was denied. Upon the hearing of the appeals here, plaintiff and defendants presented the stipulation as amended, and asked the court to dispose of the case in the light thereof. As a procedural matter plaintiff has filed here what he is pleased to call a “Plea of Release of Errors” based upon the stipulation. We have jurisdiction in the premises. Dakota County v. Glidden, 113 U. S. 222, 225, 5 S. Ct. 428, 28 L. Ed. 981; Talbot v. Mason, 125 P. 101,104 (C. C. A. 6). [2-4] The stipulation provides that the foreclosure decree shall be modified and amended so as to fix the sum of $350,000 as the total debt to plaintiff instead of the sum of $257,440, as determined by the decree; that neither the plaintiff nor its representatives or successors shall cause a sale of the mortgaged premises during the period of five years from January 9,1930; that existing injunctions be dissolved; that the receiver shall file its final report, pass its accounts, and deliver to defendants all of their documents, books, vouchers, and records now in the possession of the receiver; that the defendants be forthwith restored to possession of all the properties involved and that the receivership be wound up and the receiver discharged. In addition to these principal features, the stipulation sets forth a comprehensive scheme for the determination of all matters in litigation. We find it unnecessary to consider the plan generally except to say that we think it constitutes a valid compromise as between the parties thereto. The law favors the settlement of controversies out of court, and equity will follow the law where it may do so without the violation of any fundamental equitable principle. The receiver alone resists the confirmation of this settlement. This is not a creditors’ suit, and no other party, except possibly the American Radiator Company and Scott Dyer, whose claims were adjudicated in the foreclosure decree, is in an attitude to complain. The receiver insists that its interests have not been sufficiently protected; that no proper arrangement has been made to satisfy the receiver’s certificates, its fees, expenses and other obligations. This matter affects not only the receiver but the court as well, for, having appointed the receiver and authorized it to take possession of ánd manage the property, to employ counsel, to issue receiver’s certificates and borrow money, the court has of course pledged its faith that all of the authorized obligations of the receivership shall be paid or at least secured by proper liens upon the property in its custody.

We think these interests have been sufficiently safeguarded. The stipulation specifically provides that upon the determination of its final accounts the court may allow the receiver its proper lien for any sums found to be due it on such terms as the court may direct. The receiver’s certificates are all owned by it, and, as we understand the record, other moneys expended -in the interest of the receivership were advanced by it. No attempt is made to postpone the enforcement of said lien. The application to defer the sale of the property for five years is binding upon the plaintiff and its representatives only, and has reference to a foreclosure sale. It has no reference to court action for the enforcement of the receiver’s lien. This mutual understanding of plaintiff and defendants is reflected by certain provisions of a proposed decree intended, if adopted by the court, to confirm the stipulation, which decree, as stated in defendants’ brief, was drafted and approved by opposing counsel, and in which it is provided that the five-year period shall “in no wise limit or impair the power of the court to order a sale at any time for non-payment of obligations due to the receiver or others who have established or may hereafter establish valid liens against the premises superior to those of the plaintiff; provided, however, that the plaintiff and said defendants shall have a right to be heard upon any proposed action of the court to be taken with reference thereto.”

In this connection we think that the American Radiator Company and Scott Dyer must be considered as falling within the class of “others who have established * * * valid liens against the premises superior to those of the plaintiff.” These quasi parties are not parties to the stipulation, but in the District Court their claims were referred to a master. The master allowed them as secured lien claims, his report was unexeepted to, and was confirmed and approved by the court in the foreclosure decree. No assignment of errors challenges their correctness here. It does not appear that any citation issued to these parties. It is apparent to us that the properties involved "are more than sufficient in value to satisfy these claims and any possible lien claims of the receiver.

The objection that the stipulation, if approved by the court, would set aside certain orders approving the reports of, and making allowances to, the receiver is without merit. It is true that the stipulation discharges the plaintiff from all liability to defendants on account of the appointment of the re-‘ eeiver or on account of any improper management of the receivership, and reserves the right to defendants to contest the accounts of the receiver and to question its management of the properties, but this can in no sense be construed as an agreement between the parties to abdicate or nullify any of the allowances heretofore made to the receiver. These are matters resting in the discretion of the court alone, pending the final settlement and discharge of the receiver.

The receiver complains that upon the confirmation of the stipulation it would be required by its terms forthwith to deliver to defendants all their books and records now in its possession. We do not regard this criticism as particularly weighty. It is more than probable that the defendants would necessarily require the possession of these books, documents, and records in the management of their affairs. Their retention by the receiver could only be for evidential uses in stating its final accounts. Their production whenever and wherever needed is a matter clearly under the control of the court. In addition, the proposed' order of confirmation heretofore referred to contains a specific provision which, if approved by the court, will fully protect the receiver in this particular, and which provision the court would be warranted in adopting as a part of any confirmatory order..

Nor are we impressed with the argument that the possession of the receiver should continue in order that the court may maintain its jurisdiction over the property. We think that the doctrine of notice by lis pend-ens is sufficient for that purpose. Further, if during the progress of the cause the court should deem it necessary to repossess the properties by reason of the default of either party to the contract, it has ample authority to do so, not only in virtue of its inherent equitable jurisdiction, but by implied, if not express, provisions of the stipulation itself. . ■

Without further detailed discussion, we conclude that the various objections urged by the receiver should not impel a court of equity to disregard the stipulation of the parties and to proceed, notwithstanding, to review the decrees appealed from. The parties have agreed upon the exact amount of the mortgage debt, the postponement-of the foreclosure sale, the immediate discharge of the receiver, and the restoration of possession to the defendants, together with a full and complete plan of settlement. It is apparent that the receivership has not been a financial success, and that the relationship between defendants and the receiver has not been harmonious. The attitude of the defendants toward the receiver has been one of open hostility. We are not here concerned with fixing the responsibility for such a situation. Suffice it to say that, if under such circumstances the plaintiff whose interests are at stake and at whose instance the receiver was appointed feels that it should now be discharged and the defendants restored to possession, its attitude is entitled to serious consideration. But we are not especially concerned with the reasons leading to the compromise. The parties were competent to contract, and we regard it as not only our right, but our duty as well, to respect their voluntary settlement (Gulf, C. & S. F. R. Co. v. Dennis, 224 U. S. 504, 507, 32 S. Ct. 542, 56 L. Ed. 860); it appearing to us that the rights and interests of the receiver are sufficiently safeguarded. The court will at least relieve itself of all responsibility for further receivership losses.

The result reached here is that the case will be remanded to the District Court, with directions to confirm and enforce by appropriate orders and decrees the stipulation of the parties in accordance with the terms thereof as construed and interpreted by this opinion, and to modify the decree of foreclosure and sale in accordance therewith. As an aid to it, the court may or may not find various provisions of the proposed decree approved by the parties to be helpful.


author: WALKER, Circuit Judge.

text:
    DAVIS v. McNAIR.

    No. 5938.
    Circuit Court of Appeals, Fifth Circuit.
    April 14, 1931.
    George C. Bedell, of Jacksonville, Fla.r and David R. Dunham, of St. Augustine, Fla., for appellant.
    Frank D. Upchurch, of St. Augustine,. Fla., for appellee.
    Before FOSTER, HUTCHESON, and WALKER, Circuit Judges.

      Rehearing denied May 23, 1931.

   WALKER, Circuit Judge.

This is an appeal from a decree sustaining a motion to dismiss a bill in equity the-allegations'of which showed as follows: On July .8, 1929, the appellant, who is herein, called plaintiff, had to his credit the sum of' $35,062.74 on deposit in the savings department of the First National Bank of St. Augustine, Fla., which is herein referred to as the bank. On that day plaintiff went to the-place of business of the bank and made-known his desire to purchase Liberty bonds to the amount of $35,000, par value, in the denomination of $5,000 each, with money he-so had in deposit, and plaintiff then ordered said bonds and offered to draw out his money to the amount then to his credit, and tendered'. his passbook. He was informed at that time-by the bank’s representative that it was not necessary for him to draw out his money,, that the bank would purchase the bonds for-him and charge the price of same to his account. Plaintiff then asked when he could get the bonds, and was told that it would take eight or ten days before the bonds could be-delivered, and that he would be notified when-the bonds arrived. For reasons unknown to plaintiff the bonds were not ordered immediately as he had requested, and were not ordered until the 18th day of July, 1929, on which day the cashier of the bank ordered said bonds by letter, on the office copy of which, retained by the bank, a notation was-made showing that the order and purchase were for plaintiff. Said bonds were ordered in the amount and denomination above stated through the Chase National Bank of the-city of New York, which made due acknowledgment to the bank of the order to purchase said bonds, which said acknowledgment was received by the bank on or about July 22, 1929.

On July 23, 1929, an officer of the bank called an officer of the bond department of the Chase National Bank on long-distance telephone, and was advised that $35,000, par value, of Liberty bonds had been purchased and charged to the account of the bank. The bank by vote of its directors closed its doors for business on July 24, 1929; on or about July 25, 1929, the Comptroller of the Currency appointed T. J. Cottingham receiver of the bank, for the reason that said bank w.as insolvent and unable to pay its just and legal debts. Subsequently the Comptroller of the Currency, under and by virtue of the authority in him vested, appointed R. L. Van Zandt receiver of the hank to succeed T. J. Cottingham, and said R. L. Van Zandt was receiver of the bank at the time the bill of complaint was filed. After the bill was filed, as alleged by plaintiff by way of supplement thereto, the appellee, M. C. McNair, by authority of the Comptroller'of the Currency, succeeded R. L. Van Zandt as receiver of the bank. He is herein referred to as the defendant.

Plaintiff made demand on T. J. Cottingham, .as receiver of the bank, for delivery to plaintiff of said Liberty bonds purchased by the bank for him, and the demand was refused. Plaintiff has since made formal demand in writing on the receiver of the bank for delivery to him of said Liberty bonds, and such demand has been refused, and said Liberty bonds have never been turned over and delivered to plaintiff or any one for him. At the time plaintiff ordered the purchase of said Liberty bonds by the bank, he offered to have entered upon his passbook the charge of the money necessary to pay for said bonds, and thereafter plaintiff would not have been permitted by the bank to withdraw his money from the savings department of the bank had he desired to do so. The president of the bank stated to several persons that plaintiff had drawn out his money and purchased Liberty bonds. Plaintiff did not learn and did not know until after the bank had closed its doors for business, as above stated, that his account in the savings department of the bank had not been charged with the purchase of said bonds, if in fact his said account has not been so charged. Said bonds, purchased as above stated, are being held by the Chase National Bank as security for indebtedness of the bank to the said the Chase National Bank, but plaintiff is without information as to the amount of said indebtedness or as to how much, if any, of said indebtedness is on account of the purchase price of said bonds, or whether said Chase National Bank has a lawful lien upon said bonds. “The plaintiff is now informed that the actual purchase price of said liberty Bonds including earned interest was less than a hundred dollars more than the amount which the plaintiff had on deposit at the time he ordered said Liberty Bonds; that the plaintiff was never advised or informed until after said The First National Bank of St. Augustine closed its doors that the purchase price of said Liberty Bonds was more than the amount of his deposit, and is now without information as to the precise amount of the purchase price of said bonds and the costs and charges attendant upon said purchase, but the plaintiff has always been ready, able and willing to pay over and above the amount he had on deposit in said The First National Bank of St. Augustine whatever might be reasonably due said Bank on account of the purchase price of said bonds and its proper charges in that behalf; and the plaintiff is now ready, able and willing to do equity and so offers.”

The bill, to which the defendant, as receiver of the Bank, by substitution became the sole party defendant, contained prayers that the court decree the right of appellee as such receiver in said bonds to be subject-to a trust in favor of plaintiff, and that in the liquidation of the indebtedness for which said Chase National Bank may have a lawful lien upon said bonds, if any, the right and equity of the plaintiff be preserved, and appellee decreed to discharge said indebtedness from funds in his hands or that may come into his hands, other than said bonds; that plaintiff be decreed to have a lien upon said bonds or their proceeds to the extent of said sum of $35,062.74, the same to be enforced by sale of said bond and/or application of their proceeds to the payment of said sum, and that, if the amount' realized and available be insufficient to pay said sum, then that for the unpaid balance plaintiff be decreed to recover same from the assets of the bank in liquidation; and for such further or other relief in the premises as the nature of the circumstances óf this cause may require and to the court shall seem meet.

By what occurred, as indicated by the above-recited allegations of the bill, when plaintiff arranged with the hank for the purchase of the stated amount of Liberty bonds, the previously existing relation of creditor and debtor between plaintiff and the Bank was terminated, with a result that from that time the balance to the credit of the plaintiff ceased to be subject to be checked on by him in favor of another or others than the bank, and the bank in a 'fiduciary capacity held the amount of that balance to he used only in paying for' the bonds it agreed to buy for the plaintiff. The bank’s agreement to buy the bonds for the plaintiff having been complied with by it, .and its right and duty to use the amount of that balance in paying for the bonds having accrued while it was a going concern, when its resources were subject to its disposition, in equity the Bank is to be treated as, prior to its suspension of business, having received the amount of that balance as a payment on the purchase price of the bonds ordered and bought, in other words, as having acted in accordance with the agreement by holding that amount to be appropriated to the payment of what was owing for the bonds purchased. An effect of the Chase National Bank complying with the order to buy the bonds, and notifying the bank of the purchase and that the price was charged to the latter, was that the title to the bonds was vested in the bank; and the bank, prior to its suspension of business, having purchased the bonds for the plaintiff, and having received the amount of the deposit to be paid for or on the bonds purchased, its title thereto in equity was transferred to, or acquired by, the plaintiff, and, at and prior to the time of the bank’s suspension of business, it, by its agent, the Chase National Bank, had possession of the bonds, which were held for the plaintiff, subject to a lien thereon in favor of the Chase National Bank for whatever balance was owing to it by the bank, and to .a lien thereon in favor of the bank for so much of the amount of the cost of the bonds as was in excess of the amount received by the bank for use in paying for them. Le Marchant v. Moore, 150 N. Y. 209, 44 N. E. 770; Richardson v. Shaw, 209 U. S. 365, 28 S. Ct. 512, 52 L. Ed. 835, 14 Ann. Cas. 981; Chase v. Petroleum Bank, 66 Pa. 169.

The arrangement between the plaintiff and the bank with reference to buying the Liberty bonds would not have been substantially "different in effect if the plaintiff had checked out the amount on deposit to his credit and had then delivered that amount in cash to the bank upon the latter then agreeing to use that sum in buying the Liberty bonds desired by plaintiff. By what was done the relations of the parties with respect to the funds were so changed that thereafter the deposit was in the nature of .a special one, having the trust feature of a special deposit. The bank was in the position of admitting that it held the amount so intrusted to it for use in paying for the Liberty bonds it agreed to buy for the plaintiff. By that transaction the plaintiff became entitled to have that amount applied in paying for Liberty bonds bought pursuant to the agreement, and, upon the bank failing to segregate that amount and use it in paying for the bonds after it became its duty to do so, the plaintiff became entitled to enforce its right to have this amount applied in accordance with the agreement, though it was intermingled with the bank’s general funds. The bank’s funds went into the possession of its receiver, the defendant, subject to the preferential claim against those funds which existed in favor of the plaintiff when the bank suspended operations.

It was suggested in argument in behalf of the defendant that the plaintiff did not have a preferential claim against the funds of the bank- which came to the possession of its receiver, the defendant, because those funds were not increased as a result of the arrangement for buying Liberty bonds. By that transaction the bank ceased to be the plaintiff’s debtor for the amount which previously had been on deposit subject to check, and in effect accepted from the plaintiff the same amount in cash, to be held by it, not as its own property, but as an agent, charged with the duty or trust to use it in paying for the bonds to be purchased, and of keeping the amount so received separate from its general assets. An effect of the bank’s failure to keep the sum of money so received by it segregated from its own assets and permitting it to be commingled with its general funds was that that 'sum was added to funds then owned by the bank, and the plaintiff became entitled to have the amount of his money delivered to the bank as agent withdrawn from' the bank’s general funds with which it was commingled, dnd used in the way the bank was obligated to. use it. The assets of the bank having passed into the hands of the receiver, the defendant, increased by the •amount of plaintiff’s money wrongfully commingled therewith, those assets are held by the defendant subject to a preferential claim in favor of the plaintiff for the amount of his money which was so wrongfully commingled with funds owned by the bank. Goodyear Tire & Rubber Co. v. Hanover State Bank, 109 Kan. 772, 204 P. 992, 21 A. L. R. 677; Northwest Lumber Co. v. Scandinavian American Bank of Seattle, 130 Wash. 33, 225 P. 825, 39 A. L. R. 922; Bryan v. Coconut Grove Bank & Trust Co. (Fla.) 132 So. 481; Central National Bank v. Connecticut Mut. L. Ins. Co., 104 U. S. 54, 26 L. Ed. 693. The allegations of the bill show that, as between the plaintiff and the defendant, the former in equity has title to the Liberty bonds mentioned, subject to Hens thereon above referred to, and- that plaintiff has a preferential claim, having priority over the claims of the bank’s general creditors, against the assets of the bank held by the defendant as receiver for the amount of plaintiff’s money received by the bank as above stated, and is entitled to recover that sum of money or to have it taken from the assets of the bank held by the defendant and applied in the way the bank was obligated to apply it. The plaintiff is entitled to have the aid of a court of equity for the establishment and enforcement of those rights. It foUows that the above-mentioned ruling was erroneous.

As the Chase National Bank has not been made a party to this suit, whatever claims to or against the Liberty bonds mentioned it may have or assert are not now subject to be passed on.

The remedy which properly may be awarded in favor of the plaintiff may be affected by the reduction of the funds of the bank between the time when it in effect acknowledged its receipt from the plaintiff of the amount previously owing to him and the time when the bank’s funds, including the sums held by it for the plaintiff and commingled with those funds, passed into the custody of the defendant, and by the existence of preferential claims against those funds in favor of another or others than the plaintiff. In re Bolognesi & Co. (C. C. A.) 254 F. 770, 773 Empire State Surety Co. v. Carroll County (C. C. A.) 194 F. 593. The bill contains no allegations as to the just mentioned matters. Such allegations are not requisite to the sufficiency of the bill to show that plaintiff was entitled to relief sought. Though the funds which the bank owned at the time it commingled therewith the sum it is chargeable with having received from the plaintiff for a specific purpose were wholly dissipated before the appointment of a receiver, the plaintiff was entitled to an adjudication on the question of the title or ownership of the Liberty bonds as between him and the defendant. If the bank’s funds were reduced below the amount so received from plaintiff between the time when the bank became chargeable with the receipt of the plaintiff’s money to be used in buying the bonds and the date of the passing of the bank’s assets into the hands of the receiver, or if another or others have preferential claims against those assets, the facts in regard to those matters perhaps may be set up by way of defense. Moreland v. Brown (C. C. A.) 86 F. 257.

Because of the above-mentioned error, the decree .appealed from is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion.

Reversed.


author: PARKER, Circuit Judge.

text:
    CORNEC et al. v. BALTIMORE & O. R. CO. et al. The RICHELIEU.
    No. 3003.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.

      George Forbes and John H. Skeen, both of Baltimore, Md., and John C. Prizer, of New York City (Henry L. Wortehe, of Baltimore, Md., Barry, Wainwright, Thacher & Symmers, of New York City, Louis J. Sagner, L. Wethered Barroll, Jacob E. Cohen, Gliek & Schlossberg, Harry H. Goldberg, Harry O. Levin, Briscoe & Jones, Herbert R. O’Conor, William H. Lawrence, .and George T. Mister, all of Baltimore, Md., on the brief), for appellants.
    George W. P. Whip, of Baltimore, Md. (Duncan K. Brent, of Baltimore, Md., on the brief), for appellee Baltimore & O. R. Co.
    Emory H. Niles, of Baltimore, Md., and William P. Hurley, of Newark, N. J., for appellee Lewis Mfg. Co.
    Before PARKER and NORTHCOTT, Circuit Judges, and GRONER, District Judge.
   PARKER, Circuit Judge.

This is an appeal from a decree in admiralty dismissing libels filed against the Baltimore & Ohio Railroad Company for the recovery of damages sustained as the result of a pitch dust explosion alleged to have been due to its negligence. The libels were filed against the railroad company, which was engaged at the time of the explosion in loading a cargo of pitch into the French barque Richelieu. They were filed by the master in behalf of the owners of the vessel and the owners of the cargo, by certain members of the crew, certain stevedores employed by the railroad and by the personal representatives of certain stevedores who were killed in the explosion. It was alleged that the railroad company was guilty of negligence in creating a cloud of explosive dust while loading the cargo of pitch and in using open kerosene lights and machinery which emitted sparks and flashes of electricity in the dust thus created. The railroad company filed a cross-libel against the owners of the vessel, asking recovery for the damage done to its pier as .a' result of the explosion; and, under Admiralty Rule 56 (28 USCA § 723), it impleaded the Lewis Company, the manufacturers of the pitch, alleging that the pitch was of dangerous character, and that the manufacturers had negligently failed to give warning with regard thereto.

The District Judge dismissed all of the libels and the cross-libel. He found that the explosion was caused by the use of open lights in the cloud of pitch dust, but that the railroad company was not guilty of negligence, because the explosive character of the dust was not known and the company was not chargeable with knowledge thereof. For like reason, he dismissed the cross-libel against the owners of the vessel and discharged the manufacturers who had been impleaded under the admiralty rule.

Although the record is voluminous and the briefs unreasonably long, the facts of the case are comparatively simple. The railroad company had transported the pitch over its railroad system from Fairmont, W. Va., and Chicago, Ill., to its terminals in Baltimore, and was engaged in loading it on the Richelieu when the explosion occurred. For this purpose it was using the loading devices which it had constructed for the loading of coal on vessels, consisting of a tower, a shuttle belt, a telescopic chute, and, at the bottom of the chute, electrically operated, trimmers which changed the direction of the ' falling coal and .threw it against the sides of the vessel. These loading devices had a tendency to break the pitch up, and, when they were in operation, resulted in creating a dense cloud of pitch dust. When coal was being loaded, a sprinkler system was used to keep down the dust; but, when the railroad company was loading pitch for another company some time prior to the explosion, objection was made to the use of the sprinkler system on the ground that water injured the pitch, and thereafter, when loading pitch, nothing was done to allay the dust. The loading apparatus had been in use for several years, and the electrical machinery used in connection therewith had become considerably worn, with the result that at a number of places it emitted sparks and flashes of electricity. Without going into a minute description of its condition, it is sufficient to say that the testimony establishes beyond peradventure that it was not fit for use in an explosive atmosphere.

The loading of the vessel was well -advanced towards completion when the explosion occurred. All the work which could be done in the hold with the use of the mechanical trimmers had been completed, and they were being operated in the ’tween decks. Stevedores- had been sent into the hold to complete the trimming there, and a number were working in the ’tween decks. These stevedores were given open kerosene lamps to furnish light while they were at work. The forward hatch had been closed, and a temporary bulkhead had been erected forward of No. 2 hatch, which confined the cloud of dust created by the operation of the trimmers. This dust cloud took fire, and the explosion resulted.

The learned judge below has found that the explosion was caused by the open lamps, and it is clear that it originated either from these or from the mechanical trimmer which was operating in the ’tween decks at No. 2 hatch. We think that the evidence shows that it originated from the trimmer. Eyewitnesses, whom the judge found to be truthful, so testified; and the only substantial evidence to the contrary is the opinion of one of the experts. Direct evidence of an occurrence is, of course, entitled to greater weight than opinion evidence [Lancashire Shipping Co. v. Morse Dry Dock & Repair Co. (D. C.) 43 F.(2d) 750]; and we should hesitate to base a finding upon the opinion evidence here, which is opposed to the overwhelming weight of the testimony of eyewitnesses. It is not necessary to go into this matter, however, as the dust unquestionably exploded because of contact with ,a source of ignition for which the railroad company was responsible. The bringing of such source of ignition into contact with the dust was dangerous. The only question on this branch of the case is whether the company, in the exercise of ordinary and reasonable care, should have known that it was dangerous; i. e., that the dust was explosive. We think that this question must be answered in the affirmative.

Pitch is a carbonaceous substance more than 99 per cent, combustible and more than 50 per cent, volatile. Pitch dust is nothing but pitch in a fine state of subdivision. It is a matter of general and common knowledge that whatever will burn will burn more rapidly in fine subdivision, .and that, granted a proper admixture of air, the finer the subdivision the more rapid the rate of combustion. A dust explosion is simply the exceedingly rapid and almost instantaneous combustion of myriads of small particles of solid matter held in suspension by the air. Not all dust clouds, of course, even of combustible material, are explosive, for to render them explosive there must be the proper admixture of air to supply the necessary oxygen; but it has long been known that, if the proper mixture with the air is obtained, any dust of combustible matter will explode, and that every precaution should be taken to prevent any source of ignition from coming in contact with it. Thus it was .known that not only pitch dust and coal dust were explosive, but also that explosions were to be apprehended from the dust of grain, starch, cocoa, tea, rice, soya beans, malt, oat husk, cork, and other like substances. As said by the railroad company in its brief filed with this court in the case of Moore v. B. & O. Co., 37 F.(2d) 884, “the fact that carbonaceous or combustible matter in fine subdivision as dust floating in the air may form a highly dangerous or explosive mixture and has been the cause of numerous disastrous explosions has long been known.”

It may be true that the theory of the witness Patrick as to the mechanics of a pitch dust explosion was something new, although we are not satisfied either with the novelty or with the correctness of that theory; but certain it is that, whether the correct theory was held or not, the explosibility of pitch dust had long been known, and that is the fact of importance here. In the British Blue Book of 1914 it was stated: “Pitch dust was found to be more highly inflammable material than coal dust of the same degree of fineness and almost as dangerous as sugar.” Practically the same statement is contained in Bulletin No. 167 of the United States Bureau of Mines published in 1922. A work on “Blacks and Pitches,” published by H. M. Langton in 1925, stated that fatal explosions due to coal tar pitch had been recorded, and that “pitch dust is more highly inflammáble than coal dust of the same degree of fineness.” The United States Bureau of Mines, in a report in 1919 to the Aluminum Company of America, stated: “The inflammability tests conducted with the pitch dust indicate it is considerably more inflammable than standard Pittsburgh coal dust of about 200-mesh. Clouds of the material could be easily ignited with a bunsen burner flame, electric are, candle flame, etc. This dust must therefore be considered as dangerously inflammable when mixed with air.”

There is abundant evidence not only of pre-existing theoretical knowledge of the ex-plosibility of pitch dust, but also of so mány disastrous explosions due to it that .any person engaged in handling pitch should have known of them. In 1871 there was an explosion of grahamite dust while .a vessel was being unloaded in New York harbor; the explosion being caused by a workman’s striking a match to light his pipe. ■ Grahamite is natural pitch or asphalt. Other dust explosions had occurred from time to time in the asphalt mines of Utah and Oklahoma. A pitch dust explosion occurred at the Glasgow docks in the year 1914 while a vessel was being loaded with pitch and is reported in the British Blue Book of that year. The Blue Book for 1923 reports .another such explosion. In 1924 there was a disastrous explosion of pitch dust at the plant of the Aluminum Company of America at Massena, N. Y., an account of which was carried by various newspapers. It w.as also the subject of a special article in the Bulletin of the Department of Labor of the state of New York, which contained the following statement: “Laboratory tests and the above experience leave no doubts as to the explosibility of pitch dust, and unusual precautions should be exercised by all who handle it to minimize the damage resulting therefrom.”

In the light of the occurrences and the articles to which we have referred, the contention that' the explosibility of pitch dust was not known prior to the explosion on the. Richelieu cannot be sustained. Not only was there information available as to explosions whieh had occurred, with opinions by experts and officials of government departments that pitch dust was explosive, but it also seems to us that, in the absence of such information, the railroad company, with its vast experience as a carrier of commodities, should have known that this cloud of carbonaceous dust was explosive, and that it was dangerous to bring a source of ignition in contact with it. The man on the street may not know the dangerous character of carbonaceous dust, but this carrier knew, or should- have known it; and the records of this court show that shortly before the explosion it had built a great grain elevator at Baltimore, and, in constructing same, had used the utmost care to guard against the danger of dust explosions. It certainly seems that one who knows that grain dust will explode ought have no difficulty in concluding that pitch dust also is explosive. In this connection, it is shown by the record that, in a booklet by Price and Brown on “Dust Explosions,” published by the National Fire Protection Association, a work which collated the knowledge of government officials on the subject, and with whieh the proper officials of the the railroad should have been and probably were familiar, the following standards of care were laid down for dealing with dust:

“Unless all the conditions whieh might possibly affect the inflammability of a dust are known it is difficult to state offhand what dusts are explosive, or whether a certain dust will explode or is dangerous. One broad principle whieh may be used as a guide in determining what dusts are explosive, or dangerous is that any dust from highly carbonaceous material or from any material that will burn may explode under proper conditions and is therefore dangerous from the explosion standpoint: The fact that coal dust is explosive has been brought out very forcibly by the large losses of life often accompanying a mine explosion. * * * That carbonaceous dusts are explosive is accepted as a theory by many men prominently identified with various industries, but they seem to feel that their particular plants are immune. It is not so long ago that some of the flour millers would say that they never heard of .a dust explosion in a flour mill, while elevator men would say that they knew of the danger in flour mills, but most of them thought that elevator dusts contained too much field dirt to be explosive. However, since all carbonaceous dusts may explode, every possible precaution should be taken, not only in flour mills and elevators, but in every industry producing carbonaceous dusts, and, in fact, in other industries as well, for explosions of aluminum dusts have occurred, and there is one report of an explosion of iron dust.”

With the general and common knowledge existent as to the explosive character of carbonaceous dusts in general, and with the information which the railroad might have obtained, and which it should have obtained when it held itself out as qualified to handle pitch, as to the explosibility of pitch dust in particular, there can be no question that it was guilty of negligence in operating sparking electrical machinery and in sending open lights into a cloud of such dust. This conduct was directly in violation of the standards of eare in dealing with dust prescribed by regulations which had been in force in England and several states of this Union for a number of years, and, irrespective of regulations, was violative of ■ the standards of caution whieh would suggest themselves to a mind of reasonable prudence having such knowledge of the danger of dust explosions as the officials of the railroad must be presumed to have had. The mere fact that they had loaded coal with the same machinery and with similar open lights without explosion, and that they had been asspred that pitch would load like coal, offers no excuse for the negligence. In loading coal, the dust was kept down with the sprinkler, system which was not used in loading pitch; and it is a matter of common knowledge that the danger of explosion in a dust cloud is dependent upon its acquiring the proper density. And the fact that no explosion resulted in the loading of coal is not conclusive that the methods employed were such as in the exercise of due eare should have been used even there. Negligent methods of operation do not always or even generally result in disaster. The inquiry is, not whether a method of operation has been used without disastrous results, but whether it is of such a character that danger of injury is reasonably to be apprehended from its use. Where the element of danger is present, successful operation is to be deemed “fortunate rather than prudent.”

And we think that knowledge of the fact that it was dangerous to use the sparking machinery and the open lights around the pitch dust was directly brought home to the officials of the railroad in charge of the loading. Just four days before the explosion, while pitch was being loaded on another vessel, pitch dust on the collector rings of one of the trimmers was ignited by electricity, and directions were given that the collector rings be thoroughly blown out, the statement being made in the written directions that “they get full of that pitch and flash between them.” And on this vessel, about four hours before the explosion, there was an igniting of dust around the collector rings and a flash of yellow smoke. While these incidents did not result in an explosion, they should have put the officials in charge of the loading on notice of danger. And the fore-, man, Rice, seems to have had an idea that danger was present, for, when he sent the stevedores in with the open lights, he cautioned them to be careful, as the “stuff,” meaning the pitch, was dangerous.

The railroad company, then, undertook the loading of the pitch on the vessel, having held itself out. through .its published tariffs as qualified to perform this service. It had absolute control of the cargo and of all the details of., loading. The explosion occurred because it did the loading in such" a way as to create .a cloud of dust, and then brought into that dust cloud open lights and sparking electrical machinery. This was negligence because it knew, or in the exercise of ordinary care should have known; that' a cloud of carbonaceous dust was likely to explode if an adequate igniting agency were brought .in contact with it. The principles of law applicable are elementary, and no citation of authority is necessary. See, however, International M. M. S. S. Co. v. Fletcher (C. C. A. 2d) 296 F. 855; Grayson v. Ellerman Lines (1920) A. C. 466; The Willem Van Driel (C. C. A. 4th) 252 F. 35; Id. (D. C.) 242 F. 285; State of Maryland to Use of Goralski v. General Stevedoring Co. (D. C.) 213 F. 51, 52, Id. (C. C. A.) 219 F. 827; Quaker Oats Co. v. Grice (C. C. A. 2d) 195 F. 441; Barney v. Quaker Oats Co., 85 Vt. 372, 82 A. 113.

It is argued'that there can be no recovery in behalf of the vessel, her crew and cargo, because the master observed the manner in which the loading was being done, and knew of the creation of the cloud of dust and the use of the trimmers .and the open lights. The answer to.this, as pointed out by the court below, is that the loading was in charge of tha railroad company, as an independent contractor, and the master had no duty or right of supervision ,as to instrumentalities adopted and methods used. Atlantic Transport Co. v. State of Maryland (C. C. A. 4th) 259 F. 23; The Satilla (C. C. A. 2d) 235 F. 58; Jeffries v. De Hart (C. C. A. 3d) 102 F. 765; Grayson v. Ellerman Lines (1920) A. C. 466.

The duty rests upon the master, of course, to see that cargo is properly stowed so that the vessel will be seaworthy. The instrumentalities used for loading and the methods of work, however, are matters within the control of the contracting stevedore. In the absence of some showing that the master directed the use of negligent methods, expressly approved them, or consented to their use, we know of no principle upon which the stevedore can be absolved from liability to the vessel- for negligence in using them. The stevedoring company owes to the vessel and her owners the duty of using due care in the loading; but the vessel and her owners owe no such duty to the stevedoring company. See opinion of Lord Birkenhead in Grayson v. Ellerman Lines, supra. Negligence can be predicated only of failure in performance of duty, and the negligence is his to whom the duty appertains. The mere fact that an injured party may have had knowledge that negligent methods were being used does not, in the absence of contributory negligence, absolve the one guilty of such negligence from liability therefor.

As to the injured stevedores, it is contended that they assumed the risk of their injury, and for that reason.cannot recover; but this contention manifestly cannot be sustained. There is nothing to show that these illiterate laboring men knew or appreciated the danger of the situation when they were negligently sent into a place which the master, because of superior opportunities of knowledge, should have known to be dangerous. “Assumption of risk does not eover those unseen or obscure dangers which cannot reasonably be discerned by an employee and which the employer properly may be held to know about.” 18 R. C. L. 686; Crimmins v. Booth, 202 Mass. 17, 88 N. E. 449, 132 Am. St. Rep. 468; Promer v. Milwaukee, etc., R. Co., 90 Wis. 215, 63 N. W. 90, 48 Am. St. Rep. 905; Galveston, etc., R. Co. v. Garrett, 73 Tex. 262, 13 S. W. 62, 15 Am. St. Rep. 781. And the employee does not assume risks due to the negligence of his employer unless they are obvious or fully known and appreciated by him. Waldron v. Director General (C. C. A. 4th) 266 F. 196; Brie R. Co. v. Collins (C. C. A. 2d) 259 F. 172; Choctaw, etc., R. Co. v. McDade, 191 U. S. 64, 68, 24 S. Ct. 24, 48 L. Ed. 96; Texas & Pac. R. Co. v. Archibald, 170 U. S. 665, 673, 18 S. Ct. 777, 42 L. Ed. 1188.

As to the Lewis Company, the manufacturers of the pitch, we think that the court below properly dismissed it from the case. While there is some evidence that the pitch which it manufactured had a higher volatile content than certain other pitch handled by the railroad, there is no evidence that this rendered it or the dust created in handling it any more dangerous than any other pitch or pitch dust would have been. Pitch is not a dangerous substance, and there was no dangerous or vicious quality connected with this particular pitch which it was incumbent upon any one to communicate. Pitch dust, as we have seen, is dangerous just as is any other carbonaceous dust; but there is no more duty upon a manufacturer or shipper of pitch to communicate this fact than there would be upon a shipper of grain to communicate the fact that grain dust is explosive. The dust is not a vice of either pitch or grain. It is stirred up by the manner in which the pitch or grain is handled; and a shipper or manufacturer has the right to assume that a carrier or stevedoring company is familiar with the danger inherent in clouds of carbonaceous dusts and will protect against them accordingly.

The decree- below will be affirmed in so far as it dismissed the Lewis Company from the case and in so far ’as it dismissed the cross-libel, but will be reversed in so far as it dismissed the libels filed against the railroad company; and the cause will be remanded for further proceedings in accordance with this opinion.

Reversed in part, and remanded.

Note. — Judge GRONER, who sat in the hearing of the ease, concurred in the conclusion expressed in the foregoing opinion, but, because of his .appointment to the Court of Appeals of the District of Columbia, and consequent removal from the Fourth Circuit, did not participate in the preparation of the opinion or in the decision.


author: BOOTH, Circuit Judge,

text:
    KANSAS CITY SOUTHERN RY. CO. et al. v. SILICA PRODUCTS CO.
    No. 8954.
    Circuit Court of Appeals, Eighth Circuit.
    March 13, 1931.
    Rehearing Denied May 4, 1931.

      Arthur C. Brown, of Kansas City, Mo., for appellants.
    Thomas E. Scofield, of Kansas City, Mo. (Henry N. Ess, I. N. Watson, John B. Gage, Powell C. Groner, and Paul V. Barnett, all of Kansas City, Mo., on the brief), for appellee.
    Before KENYON and BOOTH, Circuit Judges, and REEVES, District Judge.
   BOOTH, Circuit Judge,

delivered the opinion of the Court.

This is a patent suit in conventional form involving reissue patent No. 17,207, granted to Orlando A. Collings, February 5,1929, for “waterproof plastic.” The original patent, No. 1,650,864, was granted November 29, 1927; application filed April 3, 1922. Ownership is in appellee, Silica Products Company, plaintiff below.

In the specifications of the original patent, as well as in the reissue, the invention is thus described:

“This invention relates to waterproof plasties; and it comprises a method of waterproofing concrete, stucco, plaster of Paris, etc., wherein the materials employed for making such a plastic are admixed, at the time of gaging or prior thereto, with an insoluble dry mineral matter of the nature, of a gelatinizable ‘reversible colloid’, such as dry bentonite; and it further comprises as a new and waterproof material, a set calcareous plastic material, containing disseminated particles of .a relatively dry mineral material having the properties of a gelatinizable reversible colloid, such as bentonite; all as more fully hereinafter sot forth and as claimed.”

The specifications further describe the purpose, process, and product as set out in the margin.

Numerous defenses to the suit were set up, including (1) invalidity of the patent because the alleged invention was for an inoperable process and an impossible product; (2) invalidity for lack of invention in view cyf the prior art; (3) invalidity because the reissue patent was for a different invention than the original; (4) invalidity for lack of diligence in filing application for the reissue; (5) intervening rights of the defendant between the granting of the original patent and the reissue; (6) noninfringement.

It is contended by defendants that the defense of invalidity on account of indefiniteness was also set up. We shall touch upon this later.

The trial court, by its decree, adjudged claims 1, 2, 7, 8, 9, 10, 11, 12, 13, 14, and 15 of the reissue- patent valid and infringed; and ordered an injunction and an accounting. ■ The present appeal followed.

Claims 1 to 10, inclusive, are identical in the original and in the reissue. Claim 2 may be taken as typical of the process; claim 7 as covering the ' intermediate stage plastic composition; claim 10 as covering a final stage product. Claim 12 of the reissue may be taken as typical of the first or dry stage of the mixture. They read as follows:

“2. The process of preparing a calcareous plastic capable of becoming impervious to water on access of moisture which comprises mixing dry bentonite with water and a cement of the Portland cement type, the amount of water used being merely that which will be taken up by the cement. * * *
“7. A plastic composition which will set to form a waterproof concrete comprising Portland cement and approximately five per cent, of bentonite. * * *
“10. Set calcareous cement containing bentonite in such condition as to swell upon access of moisture thereto, thereby rendering said cement impervious to water. * * *
“12. A composition consisting of hydraulic cement and bentonite adapted to form a plastic upon the addition of water.”

It is thus seen that the claims cover not only the process but the product in three stages: dry, plastic and set.

Operability.

On the question of operable invention, much evidence was introduced, and it was of a contradictory character. Tests had been made on behalf of both parties, and the results of those tests were introduced in evidence. The results appeared to be contradictory. Some of the seeming contradiction arises from the fact that in the defendants’ tests, an amount of bentonite was used differing from the amount used in the plaintiff’s tests. This diversity arose from a difference in construction of the patent by those directing the tests for defendants and those directing them for plaintiff.

In the specifications of the patent is found this language:

“I use in concrete of normal composition, in addition to the usual materials, a small proportion of a dry mineral matter [bentonite]. * * *” (Italics ours.)

Also in the specifications occurs this statement:

“Concrete made with 2 to 5 per cent, bentonite is capable of withstanding considerable hydrostatic heads of water. Higher proportions may be used.”

The exact amount, however, is not stated in the specifications. None of the claims specifies the amount except claims 7, 8, and 9. Claim 9 reads as follows:

“A waterproof Portland cement concrete of at least normal strength characterized by the admixture of approximately five per cent, of bentonite with the cement before it has set.”

The words “approximately five per cent, of bentonite” also occur in claims 7 and 8. Plaintiff contends that the language means that the amount of bentonite is to equal 5 per cent, of the amount of cement used. Defendants contend that the language means 5 per cent, of the whole concrete mix. We think the language in the three claims mentioned is ambiguous in reference to the amount of bentonite to be used. The trial court held that the percentage of bentonite was to be “understood as calculated upon the amount of cement used and not on the amount of concrete.” If this construction is adopted, the invention under the evidence is clearly operable. Furthermore, as we shall hereafter see, defendants have quite closely followed the process of plaintiff’s reissue patent and have produced a correspondingly like product. An infringer is estopped from denying utility and operability. Dunkley Co. v. Cent. Calif. Canneries (C. C. A.) 7 F.(2d) 972, 976; Boyce v. Stewart-Warner Corp. (C. C. A.) 220 F. 118, 126.

We think the view of the trial court as to the amount of bentonite to be used is correct; and we reach that conclusion the more readily because of the rule that where the language used in claims is ambiguous, that construction should be adopted which will render the patent valid rather than one which will render it invalid.

The Prior Art.

Reliance is placed upon Kraus, 1,509,406, September 23, 1924; Kraus, 1,629,714, May 24,1927; Brookby, 1,627,952, May 10, 1927; Kraus, 1,509,478, September 23, 1924; Gos-sett, 1,487,057, March 18, 1924. The first three were cited in the Patent Office.

In considering these prior art patents, it should be borne in mind that the prime object sought in the Collings patent, original and reissue, is the waterproofing of concrete, stucco, etc. The plasticity or plastic condition referred to in the specifications .and in some of the claims is merely an incident to one stage of the mixture. Kraus, 1,509,406, is concerned with the ceramic art and shows a method of increasing the plasticity of clay by mixing in bentonite - as a plasticizing agent. Kraus, 1,629,714, is merely .a divisional of 1,509,406. In neither of these patents is there any mention of concrete or Portland cement and no mention of bentonite for purposes of waterproofing. .The cement rock used by Kraus is not the equivalent of Portland cement.

Brookby, 1,627,952, has for its object the production of a plastic cementitious material for use as a mortar. It makes use of Portland cement and incorporates “a small percentage of finely divided hydrated lime and a small percentage of finely divided, highly plastie. clay, such as plastic kaolin, china clay,” ete. No mention is made of bentonite and no suggestion is made that the hydrated lime may be omitted. ' Moreover, Brookby is not properly an anticipating reference, inasmuch as the Brookby application was filed later than the Collings application.

Gossett, 1,487,057, is for a binding or bonding material which shall bind together various substances, vegetable or mineral, into a mass having the appearance of rock or stone. The binding material is made up of two solutions, in one of which bentonite is used along with iron rust and sulphate of copper. There is no mention of concrete or Portland cement and the bentonite is not mentioned as being used for a waterproofing agent.

Kraus, 1,509,478, relates particularly to refractory cements or mortars; bentonite is used as a bonding material and as a plasticizing agent. No mention is made of Portland cement or concrete and no use is made or suggested of bentonite for waterproofing purposes.

Departure.

But it is contended by defendants that there is, in the reissue patent, a departure from the original patent which renders the reissue invalid; and if there is no departure, yet the claims 11 to 15 are invalid in view of the prior art. The reissue contains a number of minor changes in the specifications, and adds new claims (11 to 15), retaining the ten of the original patent.

The changes made in the specifications are clarifying and explanatory. They apply as well to the old claims as to the new. There is no change in the fundamental invention claimed in the original application, viz., a waterproof concrete as a final product and a process for producing the same. The changes in the specifications and the new claims merely make more definite what was apparent from an analysis of the old specifications, viz., that in carrying out the process, three distinct products would or could be produced; one at each of three successive stages of the process. The first-stage product would be the dry mixture of the finely ground clinker and the bentonite with or without a filler or an aggregate. The second-stage product would be the plastic composition. The third or final-stage product would be the waterproof set concrete. The second-stage produet was covered by claim 7 in the original patent. The third or final-stage product was covered by several claims in the original patent; but the first-stage product was not covered by any of the claims of the original patent. It was to remedy this omission that the application of the reissue was made. The new claims 11 to 15 of the reissue cover the first-stage product. These claims are limited by the specifications and cover only a mixture which will be or may be produced in carrying out the process whose final result is a waterproof concrete. The new claims of the reissue are merely subeombination claims. As thus limited, each of the new claims finds a basis in the specifications as originally drawn.

We hold that the reissue was not a departure and was not invalid within the authorities on the subject. Parker & Whipple Co. v. Yale Clock Co., 123 U. S. 87, 8 S. Ct. 38, 31 L. Ed. 100; Topliff v. Topliff, 145 U. S. 156, 12 S. Ct. 825, 36 L. Ed. 658; Universal, etc., Co. v. M. B. Schenek Co. (C. C.) 165 F. 344; Van Kannel, etc., Co. v. Winton, etc., Co. (C. C. A.) 276 F. 234.

In the Topliff Case, the Supreme Court said (page 170 of 145 U. S., 12 S. Ct. 825, 831):

“From this summary of the authorities it may be regarded .as the settled rule of this court that the power to reissue may be exercised when the patent is inoperative' by reason of the fact that the specification as originally drawn was defective or insufficient, or the claims were, narrower than the actual invention of the patentee, provided the error has arisen from inadvertence or mistake, and the patentee is guilty of no fraud or deception; but that such reissues are subject to-the following qualifications:
“First. That it shall be for the same invention as the original patent, as such invention appears from the specification and claims of such original. * * *
“Third. That this court will not review the decision of the commissioner upon the question of inadvertence, accident, or mistake, unless the matter is manifest from the record. * * * ”

Diligence.

Defendants further contend that the patentee failed to exercise due diligence in filing his application for reissue, and that therefore the reissue is invalid. We think this contention cannot be sustained. The application for reissue was filed eleven months after the issuance of the original patent. We fail to find from the evidence that either defendant suffered any prejudice by reason of the delay of eleven months. In the absence of such proof, the two-year rule is generally applied to reissue eases.

In Chapman v. Wintroath, 252 U. S. 126, page 137, 40 S. Ct. 234, 236, 64 L. Ed. 491, the court said:

“In reissue cases, where there was no statutory time prescribed for the making of an application for the correction of a patent, and although unusual diligence is required in such cases, this court adopted the two-year rule as reasonable by analogy to the law of public use before an application- for a patent. Mahn v. Harwood, 112 U. S. 354, 363, 5 S. Ct. 174, 6 S. Ct. 451, 28 L. Ed. 665; Wollensak v. Reiher, 115 U. S. 96, 101, 5 S. Ct. 1137, 29 L. Ed. 350.”

See also Webster, etc., Co. v. Splitdorf, etc., Co., 264 U. S. 463, 44 S. Ct. 342, 68 L. Ed. 792; Topliff v. Topliff, supra.

Indefiniteness.

It is further contended in this court by defendants that the reissue patent is void for indefiniteness.' We think this defense is not open to defendants, first, because the defense is one which must be pleaded, and there is no sufficient allegation in the answer under which the defense could be made; and, secondly, the special allegation relied upon, in the answer, not being sufficient, no notice in connection with the general issue was given by defendants as required by 35 USCA § 69. Furthermore, the contention that the reissue patent was invalid for indefiniteness was not made at the trial and was not passed upon by the trial court. Speaking of this matter, that court said:

“I have not considered whether the patent may- not be invalid for indefiniteness under the rule declared by the Supreme Court in Wood v. Underhill, 5 How. 1, 4,12 L. Ed. 23; Tyler v. Boston, 7 Wall. 327, 330, 19 L. Ed. 93; and the Incandescent Lamp Patent, 159 U. S. 465, 474, 16 S. Ct. 75, 40 L. Ed. 221, since that issue is not raised by the pleadings nor was that contention made at the trial.”

Intervening Rights.

Defendants contend that between the date of the issue- of the original patent and the date of the application for the reissue, they acquired certain intervening rights, so that the reissue patent cannot, now be enforced against them. These intervening rights are not very clearly- defined, but as we gather from the brief of counsel, they relate to the employment of bentonite m concrete to increase the plasticity or workability thereof. In view of what we have already said, we think there is no substantial merit in this contention of defendants. Walker on Patents (6th Ed.) § 299, states the law on intervening rights as follows (page 373):

“An intervening right is acquired by any person who manufactures and/or sells an article, or uses a process, between the grant of the original patent and the filing of the application for reissue, and not covered by the claims of the original patent, said party having relied on the omission of the original patent to claim the invention now embraced in the enlarged or broadened claims of the reissue; and that by reason thereof he is immune from liability and enjoys an irrevocable and permanent license to continue to manufacture and/or sell and/or use the invention without restriction.”

On the 7th of February, 1927, Charles P. Derleth became licensee of Collings under the application which ripened into patent No. 1,650,864. The licensee admitted the validity of the patent to be obtained,, and any reissue thereof. Mr. Derleth, proceeding under the license, sold bentonite under the trade name of “Colloy.” Mr. Derleth was fully acquainted with the .allowance of the patent and on December 5, 1927, wrote as- follows:

“Mr. W. A. Collings,
“1300 South Los Angeles St.,
“Los Angeles, California.
“Dear Sir:
“My congratulations to you in your success in having allowed the patent covering the use of Bentonite in concrete and Portland cement compositions.
“We acknowledged Mr. Schofield’s advice of allowance as per the attacked copy and sincerely hope that the broad claims as originally requested have been allowed and it now is advisable to make fullest use of this patent.
“If there is any way that we can co-operate in your activity in the West, please do not hesitate to advise.”

Some time in 1928, the license was canceled by Mr. Derleth. On February 11,1928, defendant Colloy Products Company was incorporated, Mr. Derleth being a large stockholder, and it continued thereafter' tó sell its product “Colloy,” as stated' by its'counsel, “in reliance upon the limitations'of the plaintiff’s original patent.” In- -other words, Mr. Derleth and his company, the Colloy Products Company, in the esereise of their judgment, concluded that the process and the product of plaintiff’s patent lacked operability. But we have now held that the reissue patent, the first ten claims of which are identical with the ten claims of the original patent, is operable and valid. So far, therefore, as these ten claims are concerned, there can be no intervening rights' of defendants. The Colloy Products Company simply speculated on the validity of the original patent. And as to the claims added in the reissue, there could be no substantial intervening rights of 'defendants. The new claims cover the first stage product or mixture formed in carrying out the process. This was not covered by the original patent. Assuming, but without deciding, that defendants, by reason of this omission, had the right to make this first-stage product or mixture, they have not stopped there but have carried out the full process and produced the final, finished product. They are therefore infringers. We are unable to see how any substantial intervening rights of defendants are prejudiced by the enforcement of the new claims of the reissue patent.

Infringement.

There remains the question of infringement. The use by defendant railway company in making concrete with “Colloy” as a constituent is admitted, and the sale of “Colloy” by defendant Products Company to the railway company is also admitted. It is also admitted or proven that “Colloy” is made up of 40 per cent, of bentonite and 60 per cent, of silica. The process of admixture with the'Portland cement is substantially the same as in plaintiff’s patent. But defendants claim that the quantity of bentonite used by them is different from the quantity contemplated by the teaching of the patent; that the manner of use was different; and that the effect produced was different. As to the amount used, Dr. Roy cross-testified as follows :

“I would say that the percentage of Colloy to the cement was not over four per cent. It may have been somewhat under four per cent. .Well, it might have been as low as two per cent, and possibly three per cent.; I would say as low as three per cent., possibly. I would estimate that it was somewhere between two and four per cent.”

This would make the amount of bentonite used .8 per cent, to 1.6 per cent, of the Portland cement.

It is to be noted that except in the claims 7, 8, and 9, the reissue patent puts no limitation on the amount of bentonite except that the specifications use the expression “a small proportion.” The reissue patent also contains this statement in the specifications:

“The amount of bentonite added is that which is necessary for retaining the plastie properties and giving waterproof qualities, and will vary within wide limits, depending upon the extent of the plastic and waterproof properties desired and the qualities of bentonite used.”

We think the amount used by defendants would come within the claims 1, 2.10, 11, 12, 13,14, apd 15, but not within 7, 8, and 9.

As to the manner of the use of the bentonite, it is the contention of defendants that plaintiff’s patent requires that the bentonite shall remain in a dry state throughout the process, and also in the finished product, whereas defendants’ use of bentonite includes the wetting of it during the process. As to this contention, it is sufficient to say that defendants’ statement of what plaintiff’s patent requires is not in accord with our understanding of the teaching of the patent.

As to defendants’ contention that the result of their use of bentonite is to produce a water-tightening and not a waterproofing in the finished product, and, in support of this contention, that they use a different agent for waterproofing, all that need be said is that defendants have followed the process of the patent with substantial closeness. If in some slight particular there has been a variance and the result has been a product inferior in waterproofing to the product of the patent, this will not avoid infringement. “One does not escape infringement by practicing invention imperfectly.” Gibbs v. Triumph Trap Co. (C. C. A.) 26 F.(2d) 312; Hobbs v. Beach, 180 U. S. 383, 401, 21 S. Ct. 409, 45 L. Ed. 586; Syracuse, etc., Co. v. Leroy, etc., Co. (D. C.) 233 F. 682; General Elec. Co. v. Alexander (C. C. A.) 280 F. 852, 855; McDonough v. Johnson-Wentworth Co., 30 F.(2d) 375, 384 (C. C. A. 8).

Even if defendants used the bentonite, as is claimed, for plasticity and water-tightening, and not for waterproofing, this would not avoid infringement. The purpose and intent of defendants is immaterial. Kawneer Mfg. Co. v. Toledo, etc., Co. (D. C.) 232 F. 362; Thompson v. N. T. Bushnell Co. (C. C. A.) 96 F. 238; Parker v. Huhne, 18 Fed. Cas. No. 10,740.

Our conclusion is that the decree should be modified so as not to hold claims 7, 8, and 9 infringed, and, as so modified, it is affirmed.

       “As water and cement after setting do not have quite their original joint volume and as a limit is placed to the contraction of the concrete as a whole by the rigidity of the coarser aggregate,' it follows that such a concrete must be, of necessity, more or less minutely pervious. * * * Sometimes this pervious character is unimportant, as in cases where the concrete is not used in wet or moist situations. But sometimes the pervious character is a serious objection, as in concrete exposed to water under hydrostatic head, in stucco coatings, etc.
      “It is the purpose of the present invention to obviate this penetrability by water. To this end, I use in concrete of normal composition, in addition to the usual materials, a small proportion of a dry mineral matter having the properties of a reversible swelling or gelatinizable colloid; that is, capable of swelling with water and of being dried without forfeiting its swelling power on again wetting. * * ♦ I regard some varieties of a mineral known as bentonite as the most available for the present purposes. * * * Although sometimes regarded as being, generically, a ‘clay’ bentonite is not really a clay in the ordinary sense. Unlike clays, a moderate degree of roasting does not impair materially its property of taking up water to form a plastic mass. Like the clays, however, the presence of free lime tends to hinder its assuming a dispersoid state or condition; and, for this reason and because its hydration requires time, it can be admixed with the wet concrete batch without much moistening or swelling. The water of the wet mix goes preferentially to the .cement constituents during the time occupied in setting and the bentonite remains relatively dry; in a condition in which it is able to take up water. After the concrete is set these minerals are hydrated and the bulk of the free lime has disappeared so that free swelling of the bentonite by water is no longer inhibited. * * *
      “The bentonite is advantageously used in a rather coarse condition although for some purposes, it may be used in a somewhat fiper condition. It may be admixed with cement in the clinker grinding mills or added to the mix just prior to making the concrete. In the concrete, it does not swell to any material extent during mixing and setting, for reasons stated ante, nor is it much affected by the cement; it remains in the wet material in its original unhydrated state during the setting. On subsequent exposure of the said concrete to water, tho moisture entering through any pore encounters the bentonite and swells it, effectually plugging the pore. Concrete made with 2 to 5 per cent bentonite is capable.of withstanding considerable hydrostatic-heads of water. Higher proportions may be used.”