author: CHESNUT, District Judge.

text:
    SWAN ISLAND CLUB, Inc., v. ANSELL.
    No. 3175.
    Circuit Court of Appeals, Fourth Circuit.
    July 8, 1931.

      M. B. Simpson and J. C. B. Ehringhaus, both of Elizabeth City, N. C. (Ehringhaus & Hall, of Elizabeth City, N. C., on the brief), for appellant.
    G-. L. Jones, of Asheville, N. C. (George H. Ward, of Asheville, N. C., and Ward & Grimes, of Washington, N. C., on the brief), for appellee.
    Before NORTHCOTT and SOPER, Circuit Judges, and CHESNUT, District Judge.
   CHESNUT, District Judge.

The question presented by the appeal in this ease is whether there was a sufficient amount in controversy to confer jurisdiction on the District Court, the parties being of diverse citizenship (U. S. Code Ann., title 28, § 41). The plaintiff’s bill of .complaint alleged, and the defendant’s answer denied, that more than $3,000, exclusive of interest and costs, was involved in the controversy. The subject matter of the litigation is the plaintiff’s effort, by bill in equity for an injunction, to protect its property, the chief-utility of which is for shooting wild fowl, from threatened and continuing trespasses by the defendant in consequence of which the game is driven away, and the value of the property substantially destroyed.

On the filing of the plaintiff’s bill supported by affidavits, the District Court entered a restraining order and set the ease for hearing on the plaintiff’s motion for a temporary injunction. After hearing counsel for the parties, but without taking any testimony, the court refused and dismissed the motion on the ground that the court was without jurisdiction of the cause. In view of the issue made by the bill and answer, the evident basis of the order was that the amount in controversy did not exceed $3,000 exclusive of interest and costs. As this conclusion was reached on bill and answer without testimony, it is necessary to examine the allegations of the bill and any other information appearing in the record to determine whether there is a legal possibility that the requisite amount is in controversy in good faith.

It is alleged that the plaintiff, a Massachusetts corporation, is the owner and in possession of certain tracts of land in Currituck county, N. C., containing about 9,236 acres, shown and described on a plat filed with the bill of complaint; that these tracts consist largely of islands, marsh lands, and lands under water, the chief utility of which is for gunning purposes and especially for shooting wild fowl; that the plaintiff’s title to the property has been duly confirmed by statutory registration proceedings in the superior court of Currituck county, N. C., in accordance with the applicable North Carolina statute; that the lands have been equipped at great expense with the necessary appliances, equipment and decoys, and the plaintiff employs the necessary personnel to enable its stockholders to shoot wild water fowl in accordance with the law within the< limits of its own property during a very limited shooting season; that the lands are of a value in excess of $50,000; that the defendant has trespassed upon said premises and located thereon certain devices known as “blinds” for the purpose of shooting wild water fowl and other game, and threatens to continue to trespass upon said lands whenever he desires and to take with him upon said premises other people for the purpose of shooting wild water fowl and other game thereon from the said “blinds”; and that the defendant’s blinds are so strategically located with respect to the plaintiff’s property that the effect of shooting water fowl, and particularly ducks, from the defendant’s blinds will be to substantially destroy the gunning rights and privileges of the plaintiff on its property and thus render it almost valueless; and that the damage which will be sustained by the plaintiff unless the defendant’s acts are enjoined, will amount to more than $3,000, exclusive of interest and costs; and that the defendant is insolvent.

Upon consideration of the facts so alleged, we are unable to concur in the opinion reached by the District Court that the requisite amount cannot in legal possibility be involved in the controversy. Barry v. Edmunds, 116 U. S. 550, 6 S. Ct. 501, 29 L. Ed. 729. In our opinion the allegations of the bill, if supported by testimony, are sufficient to establish the jurisdiction of the District Court with respect to the amount in controversy. Of course, the final determination of this issue as to the amount in controversy will depend upon the proof. The complainant’s property is alleged to be of a value in excess of $50,000, and its chief utility is for the shooting of wild water fowl. It is specifically alleged that the effect of the defendant’s trespasses will be to practically destroy this utility and render worthless the capital value of the plaintiff’s investment. The trespasses sought to be enjoined are not merely sporadic and limited to a day or two in point of time and in effect to a small area of the plaintiff’s property, but are alleged to be continuing in their nature, exercised under a claim of right by the defendant, and effective to substantially impair the chief utility of the whole or the larger part of the plaintiff’s property.

It has been uniformly held by the federal courts that the test of jurisdiction in a case of this kind is the value of the object to be gained by the suit, which in this ease is the preservation of the plaintiff’s property rights. Glenwood Light & Water Co. v. Mutual Light, Heat & Power Co., 239 U. S. 121, 36 S. Ct. 30, 60 L. Ed. 174; Hunt v. New York Cotton Exchange, 205 U. S. 322, 27 S. Ct. 529, 51 L. Ed. 821; Packard v. Banton, 264 U. S. 140, 142, 44 S. Ct. 257, 68 L. Ed. 596; Scott v. Donald, 165 U. S. 58, 17 S. Ct. 265, 41 L. Ed. 632; Mississippi & M. Railroad Co. v. Ward, 2 Black, 485, 492, 17 L. Ed. 311; Louisville & N. R. Co. v. Smith (C. C. A. 5th) 128 F. 1; Fidler v. Roberts, 41 F.(2d) 305 (C. C. A. 7th). In Smith v. Bivens, 56 F. 352 (C. C. S. C.) it was held by Judge Simonton that the statutory amount in controversy (then $2,-000) was shown to exist where the plaintiff’s bill in ultimate effect sought to protect the value of the land, usable only for pasturage, from destruction by trespassing cattle of neighboring property owners, and where it appeared the capital value of the land was more than $2,000. In Northern P. R. Co. v. Cunningham, 103 F. 708 (C. C. Wash.), there was a like holding in a ease similar on the facts. Of course, the mere allegation of the plaintiff that the amount in controversy exceeds $3,000 will not suffice where it is apparent from the plaintiff’s own statement of the case, or from the proof, that by no legal possibility can the plaintiff’s claim amount to so much. Thus, it was held by the Circuit Court of Appeals for the Third Circuit in Wilderman v. Roth, 17 F.(2d) 486 (cited by Appellee’s counsel), that the jurisdictional amount was not really involved in good faith where a domestic servant sued to recover $5,-000 for the period of eight months’ services. But this was determined not upon the state of the pleadings without proof, but after testimony in the ease had shown that the plaintiff’s claim could never have exceeded $1,600 on the basis of the highest compensation for the services rendered.

During the oral argument it was contended that the order appealed from might he sustained on the ground that there was no equity jurisdiction because the plaintiff had an adequate remedy at law. But it is thoroughly well established that equity does have jurisdiction to restrain repeated and continuing trespasses such as are alleged by the pleadings to be involved in this case. 4 Pomeroy Eq. Jur. (4th Ed.) §§ 1356, 1357; Glenwood Light & Water Co. v. Mutual Light Co., 239 U. S. 121, 125, 36 S. Ct. 30, 60 L. Ed. 174; Erhardt v. Boara, 113 U. S. 537, 5 S. Ct. 565, 28 L. Ed. 1116; Northern Pacific Co. v. Cunningham, 103 F. 708 (C. C. Wash.). The exercise of this jurisdiction has been specifically, applied in a number of cases by state courts of last resort to the protection of the plaintiff’s property rights in game preserves. Kellogg v. King, 114 Cal. 378, 46 P. 166, 55 Am. St. Rep. 74; Bolsa Land Co. v. Burdick, 151 Cal. 254, 90 P. 532, 12 L. R. A. (N. S.) 275; Whittaker v. Stangvick, 100 Minn. 386, 111 N. W. 295, 10 L. R. A. (N. S.) 921, 117 Am. St. Rep. 703, 10 Ann. Cas. 528; Ainsworth v. Munoskong Hunting Club, 153 Mich. 185, 116 N. W. 992, 17 L. R. A. (N. S.) 1236, 126 Am. St. Rep. 474, 15 Ann. Cas. 706. The effeet of these cases on this point is well summarized in 12 R. C. L. page 692, § 8, under the title of Game Laws, as follows: “An action for damages is however, an ineffectual remedy against continuing trespasses, and where one or more persons continually violate or threaten to violate the owner’s rights there is such a failure of remedy at law that the equitable jurisdiction of the court may be invoked, and further trespassing enjoined. Moreover, the shooting of guns, over one’s land so as to cause considerable damage and impair the value of the landowner’s shooting privileges is a wrong which may be restrained by injunction. An injunction will not necessarily be denied because the trespasser is solvent and able to pay any damage which may be recovered against him for his trespass. * * * The prevention of a multiplicity of trespass actions also forms sufficient ground for equitable relief. Not only is an injunction a proper remedy for the protection of an exclusive hunting privilege, but if a member of the public is denied his common right to hunt on public waters, the interference with his rights may be enjoined.”

It has also been suggested that the ease in its essence involves only “poaching” on game preserves, and that such a controversy is too trivial in its nature and effect to be properly within the jurisdiction of the federal courts of equity, and for that reason the plaintiff should be relegated to local police protection. However, when diverse citizenship is established it is not the intrinsic nature of the subject-matter involved but the monetary extent of the plaintiff’s claim or reasonably anticipated damage that confers jurisdiction on the District Court. It is obvious enough that mere sporadic poaching on game preserves would not ordinarily carry with it a sufficient amount in controversy to confer jurisdiction, but here we are dealing with a case where under the allegations of the bill the alleged trespasses are not merely casual but continuous and exereised under a claim of right, and of such a nature that they will virtually destroy the capital value of the plaintiff’s property unless enjoined.

For these reasons we think the order appealed from should be reversed and the ease remanded for subsequent proceedings not inconsistent with the opinion, and it is so ordered.

Reversed.


source: Caselaw Access Project

author: SAWTELLE, Circuit Judge.

license: Public Domain

text:
    NORTHWESTERN PULP & PAPER CO. v. FINISH LUTH BOOK CONCERN et al.
    No. 6414.
    Circuit Court of Appeals, Ninth Circuit.
    July 13, 1931.

      Wm. B. Layton, N. Bay Alber, and Myer C. Rubin, all of Portland, Or., for appellant.
    E. B. Tongue, of Hillsboro, Or., and W. S. U’Ren, of Portland, Or., for appellees.
    Before WILBUR and SAWTELLE, Circuit Judges, and NETERER, District Judge.
   SAWTELLE, Circuit Judge.

This is an appeal from an order of adjudication in bankruptcy.

The original petition of involuntary bankruptcy was filed on August 18, 1930. It set forth that the alleged bankrupt, while insolvent, “suffered and permitted * * * one of its creditors to obtain a preference through legal proceedings and not having at least five days before a sale or final disposition of its property affected by such preference vacated or discharged such preference.”

The preference complained of is alleged to be that the respondent allowed Thomas and Meservy, one of its creditors, holding a claim of $1,000 against the respondent, to secure a judgment by default in the circuit court of Multnomah county, Ore.; allowed said creditor to secure an execution on the judgment on all of the respondent’s timber lands, of the approximate value of $50,000; and further allowed said property to be advertised and sold by the sheriff of said county for the amount of the judgment and costs, and a sheriff’s certificate to issue thereon to said Thomas and Meservy for the amount of their claim and costs.

The petition further alleges that all these acts were committed within four months pri- or to the filing of the petition. There was no demurrer or motion filed by the alleged bankrupt to test the legal sufficiency of this pleading.

The only act of bankruptcy alleged refers specifically to the judgment obtained by Thomas and Meservy and the failure to discharge the preference arising thereunder within five days before the sale. If the dates of the rendition of the judgment or the docketing thereof, the sale of the property, and the issuance of the sheriff’s certificate, had been properly set forth in the original petition, undoubtedly the latter would have been held by the court to have been insufficient to allege an act of bankruptcy.

Leave to amend was granted to the petitioning creditors, however, and thereafter, to-wit, on October 14, 1930, an amended petition was filed, setting forth in detail the entry of the judgment above referred to. There it was stated that the Thomas and Meservy judgment was taken on August 27,1929, was entered on the judgment docket in Multno-mah county the same day, and a transcript thereof was entered on the judgment docket of the circuit court of Clatsop county, Ore., on August 30, 1929; that such judgment was a lien on the respondent’s property in the amount of $1,181.60; that respondent did not vaeate the same within 30 days from the date of its entry or docketing, nor at any time thereafter, and suffered a large amount of its real property to be sold under execution on December 19, 1929, which was also the date of the sheriff’s certificate of sale. (In a stipulation filed by counsel on both sides on the same day as that on which the amended petition was filed — October 14, 1930 — the date of the sale is given as December 24,1929.)

It is clear that the facte alleged in connection with the above judgment and sale of property did not constitute an act of bankruptcy.

In the amended petition, however, the creditors attempted to set forth an additional act of bankruptcy. They alleged, in substance, that the respondent suffered judgment to be entered against it in favor of the Pacific Coast Credit Association on September 21,1929; that said judgment was entered on the docket of the circuit court of Clatsop county on September 23, 1929; and that a sale under execution out of said court was had September 3,1939.

It should be noticed in passing that the amended petition fails to specify that the alleged bankrupt was insolvent on the date when the alleged preference in the ease of the Pacific Coast Credit Association was obtained, i. e., when the judgment was docketed. Furthermore, the stipulation of counsel, the opinion of the court below, and the narrative statement of evidence all fail to specify the alleged bankrupt’s insolvency at the time that either of the two judgments was obtained.

While the omission of this statutory element of the act of bankruptcy complained of would itself render the amended petition fatally defective, there are additional grounds for reversing the judgment in this case These grounds are to be taken up hereafter.

It is seriously questioned whether the amendment should have been allowed at all, since it was subject to the same objection as .the original petition, in that it failed to allege an act of bankruptcy.

But, as we regard this case, neither the original nor the amended petition sets forth an act of bankruptcy. Therefore we pass to the main question in this controversy.

It will be seen that both judgments against the alleged bankrupt were docketed and therefore, according to the law of Oregon, became valid liens, long before the four-month period had commenced to run. Section 2-1691, Oregon Laws, 1939 Compilation. The two judgments, therefore, can be regarded as governed by the same legal principles, regardless of the dates when subsequent steps, looking to the enforcement of the liens thereunder, were taken.

It is worthy of note that, under the ap-pellee’s theory, the “sale” under the Thomas and Meservy judgments was not to be “completed” until December 24, 1939, and the Pacific Coast Credit Association “sale,” not before September 3, 1931. The respective periods for the exereise of rights under the equity of redemption were to expire on those dates. In other words, no act of bankruptcy whatever had been consummated at the time of the filing of either the original or the amended petition, if we accept the appellee’s theory with its full implications.

The controlling question presented in this ease is whether or not an act of bankruptcy is committed by an insolvent debtor’s failure to vacate a judgment that gave rise to a lien at a date prior to the commencement of the four-month period, within at least five days before the date of sale or other disposition of property affected by the judgment, said sale taking place within the four-month period.

If we apply to this definite problem certain fundamental principles of law, as set forth in the statute itself and expounded by numerous courts, we shall find that many of the apparent difficulties of the case will disappear.

The appellees invoke four clauses of section 3(a) of the Bankruptcy Act, as amended by the Act of May 27,1926, § 3 (11 USCA § 21(a) as follows: “Acts of bankruptcy by a person shall consist of his having (1) conveyed, transferred, concealed, or removed, or permitted to be concealed or removed, any part of his property with intent to hinder, delay, or defraud his creditors, or any of them; or (2) transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors; or (3) suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings, and not having at least five days before a sale or other disposition of any property affected by such preference vacated or discharged such preference; or (4) suffered, or permitted, while insolvent, any creditor to obtain through legal proceedings any levy, attachment, judgment, or other lien, and not having vacated or discharged the same within thirty days from the date such levy, attachment, judgment, or other lien was obtained. * * * ” Subsection (b) of the same section (11 USCA § 21 (b) provides: “A petition may be filed against a person who is insolvent and who has committed an act of bankruptcy within four months after the commission of such act.”

The appellees contend that suffering or permitting a judgment to be entered by any creditor or creditors, while the debtor is insolvent, thereby giving said creditor or creditors a preference, is tantamount to a transfer.

Though several opinions of lower federal courts are cited in support of this contention, numerous Supreme Court decisions, which will be considered later, hold that, when so created by state statute, a judgment becomes a valid lien as of the date of proper entry. It would be straining language to interpret a judgment “lien” as equivalent to a “transfer,” when the statute provides separately for “transfers” and for “preferences through legal proceedings.” A judgment and its resultant lien fall naturally within the latter classification.

The act of bankruptcy, then, if any was committed in this case, was a violation of clause (3) or clause (4) of section 3(a), 11 USCA § 21 (a) (3) (4).

A scrutiny of each of these two clauses reveals that the act of bankruptcy therein defined consists of two elements, each of which must be present to bring the debtor within the purview of the statute: (1). The debtor must, while insolvent, suffer or permit a preference to be obtained; (3) he must fail to discharge such preference within a stated time.

The use of the conjunction “and” instead of the disjunctive particle “or” indicates that both elements must concur to constitute an act of bankruptcy. In re Vetterman (D. C.) 135 F. 443, 444. And both must occur within the four-month period prior to the filing of the petition in bankruptcy. If the lien is obtained before the determining period has commenced to run, and enforcement proceedings are instituted withm the four-months’ term, a complete act of bankruptcy has not been committed.

That both judgments in this case created valid liens at the time the judgments were docketed is admitted by the appellee in its amended petition. Provision for the obtaining of such liens is contained in the Oregon statute, supra.

It next becomes necessary to inquire whether merely permitting, while the debtor is insolvent, a judgment creditor to enforce, within the four-month period preceding the filing of the petition, a valid lien docketed many months in the past, constitutes an act ■of bankruptcy.

The general principle is thus laid down in Remington on Bankruptcy, section 159, vol. I, p. 199 (3d Ed.): “The mere enforcement, within the four months period, of a lien obtained before the four months period, is valid and unaffected.”

The leading case on this subject is that of Metcalf v. Barker, 187 U. S. 165, 174, 23 S. Ct. 67, 71, 47 L. Ed. 122, in which Mr. Chief Justice Fuller enunciated the following doctrine: “ * * Where the lien is obtained more than four months prior to the filing of the petition, it is not only not to be deemed to be null and void on adjudication, ■but its validity is recognized.”

See, also, Thompson v. Fairbanks, 196 U. S. 516, 525, 35 S. Ct. 306, 49 L. Ed. 577.

The doctrine laid down in Metcalf v. Barker, has been recognized or approved in later decisions of the United States Supreme Court. In Globe Bank, etc., v. Martin, 236 U. S. 288, 299, 35 S. Ct. 377, 381, 59 L. Ed. 583, Mr. Justice Day said: “The difference, having the provisions of the act in view, between the beginning of a proceeding to assert liens that existed more than four months before the filing of the petition in bankruptcy, and the attempt to create them by attachment and other proceedings within four months, has been recognized in decisions of this court. In Metcalf v. Barker, * * * a proceeding to .give effect to a prior lien existing more than four months before the filing of the bankruptcy petition was held not within the meaning of section 67f of the bankruptcy act [11 USCA § 107, subd. f].”

See, also, Taubel, etc., Co. v. Fox, 264 U. S. 426, 430, 44 S. Ct. 396, 68 L. Ed. 770.

District and Circuit Courts have followed this principle for the past two decades. In Colston v. Austin Run Mining Company, 194 F. 929, 935 (C. C. A. 3), the court said, with reference to a foreign attachment lien created before the commencement of the four-month period: “ * * * both reason and the weight of authority compel the conclusion that mere failure, while insolvent, to vacate or discharge the lien within the statutory period of four months, and at least five days before a sale or final disposition of the property affeeted, does not constitute an act of bankruptcy. Priority is obtained when a lien attaches, and not when it is enforced. The date of the sale is immaterial in this respect; whenever it takes place, it relates back to the date when the lien attached.”

In Re Deer Creek Water & Water Power Co. (D. C.) 205 F. 205, 206, we find the following language: “It is not sufficient to charge acts of bankruptcy in the language of the statute. [Citing cases.] And the facts appearing from the petition showing sufferance of the enforcement by execution of a lien antedating four months the filing of the petition do not constitute or amount to such.”

See, also, Yumet & Co. v. Delgado et al. (C. C. A. 1) 243 F. 519, 520, citing Metcalf v. Barker; In re Brinn (D. C.) 262 F. 527, 530; In re D. F. Herlehy (D. C.) 247 F. 369, 373.

In the ease of In re McGraw (D. C.) 254 F. 442, 446, the situation is thus aptly summarized: “The rendering of a judgment, therefore, can only constitute an act of bankruptcy when (a) the debtor is insolvent, (b) has within 4 months of the filing of the bankruptcy petition suffered and permitted it to be obtained, (c) upon which execution has issued, (d) been levied upon his property, (e) such property advertised for sale, and (f) he has failed, at least 5 days before the date fixed for sale, to discharge or vacate the same; and all these prerequisites must.occur within 4 months of the filing of the petition.” (Italics our own).

So also in Gatell v. Millian, 2 F.(2d) 365 (C. G. A. 1), decided in 1924, per curiam: “The attachment made more than four months prior to the filing of the petition in bankruptcy created a valid lien. * * * The judgment, execution, and sale of the attached land within the four months and pri- or to the filing of the petition in bankruptcy were in enforcement of the lien acquired pri- or to the four months’ period, and were valid notwithstanding the subsequent adjudication.”

See, also, In re Berlowe (D. C.) 7 F.(2d) 898, 900, decided in 1925, and Julius S. Cohn & Co. et al. v. Drennan (D. C.) 19 F.(2d) 642, 643, decided in 1927, in which latter ease the following language was used: “When such a lien, created by an attachment, has been subsistent beyond four months, the property or money seized by garnishment or other mesne process is not discharged therefrom simply because the judgment necessary for its recognition and enforcement comes of a date within four months of a date when less diligent creditors elect to file bankruptcy proceedings.”

If an inchoate lien such as an attachment is given such validity if obtained prior to the four-month period,.a fortiori a judgment lien, representing a complete right, should be accorded at least as much weight.

Another recent ease in point is In re Kuhn et al., 35 F.(2d) 817, 818 (C. C. A. 7), decided November 13, 1929.

A similar doctrine has been announced by state Supreme Courts in recént decisions. In Steinfeld v. Copper State Mining Company et al., 290 P. 155, 157, decided July 19, 1930, the Supreme Court of Arizona said: “In 1914, one Leo Goldschmidt obtained a judgment against the Calumet & Copper Creek Mining Company for approximately $9,000, which judgment was docketed in Pi-nal county November 16, 1914. On June 2, 1915, the Calumet & Copper Creek' Mining Company was adjudicated a bankrupt. This adjudication did not affect the Ken of the Goldschmidt judgment.”

The Supreme Court of Virginia, in a case decided September 12, 1930, used the following language: “Neither the Bankruptcy Act (11 USCA), nor section 4359 (40), paragraph i [Code Va. 1924], above quoted, has the effect of nullifying or disturbing the order of priority of judgment liens acquired more than four months prior to the adjudication in bankruptcy.” Savings & Loan Corporation v. Bear, 154 S. E. 587, 592.

Some confusion has arisen as to the interpretation of the case of Citizens’ Banking Company v. Ravenna National Bank, 234 U. S. 360, 34 S. Ct. 806, 58 L. Ed, 1352. This case, which is relied upon heavily by the appellant, supports the latter’s contention only indirectly. In fact, it is likewise cited by the court below to sustain a contrary view.

The difficulty probably arises from the fact that the Ravenna Case did not involve the same facts as does the instant suit. There the act charged was that the alleged bankrupt, within four months next preceding the filing of the petition, and while insolvent, (a) suffered and permitted the Citizens’ Banking Company to recover a judgment against her, and to have an execution issued and levied thereunder, whereby the company obtained a preference over her other creditors, and (b) at the time of the filing of the petition, which was one day less than four months after the levy of the execution, she had not vacated or discharged the levy and resulting preference. No reference was made to a date of sale, within five days before which date she would have been obliged to vacate the levy if she wished to avoid an act of bankruptcy.

It will be noted that in the Ravenna Case, all the acts complained of were committed within the four-month period. The Supreme Court held that mere inaction by an insolvent debtor for four months after the levy of an execution upon his real estate did not constitute an act of bankruptcy. This interpretation of the Ravenna, Case has already been given by this court. Larkin-Green Logging Co. v. Sabin, 222 F. 814, 816.

In the instant ease, on the other hand, there were dates of sale under both judgments, from which dates the five-day period for discharging the preferences might have been computed. Both judgments, however, were created into liens on the debtor’s property before the commencement of the four-month period, and were therefore unquestionably valid.

But even in the Ravenna Case, which, as we have said, did not present facts parallel with those at bar, the Supreme Court did use, on pages 364 and 365 of 234 U. S., 34 S. Ct. 806, 808, language that sustains the general principle by which we are being guided here: “Looking at the terms of this provision [section 3a(3) of the Bankruptcy Act], it is manifest that the act of bankruptcy which it defines consists of three elements. The first is the insolvency of the debtor; the second is suffering or permitting a creditor to obtain a preference through legal proceedings; that is, to acquire a lien upon property of the debtor by means of a judgment, attachment, execution, or kindred proceeding, the enforcement of which will enable the creditor to collect a greater percentage of his claim than other creditors of the same class; and the third is the failure of the debtor to vacate or discharge the lien and resulting preference five days before a sale or final disposition of any property affected. Only through the combination of the three elements is the act of bankruptcy committed. Insolvency alone does not suffice, nor is it enough that it be coupled with suffering or permitting a creditor to obtain a preference by legal proceedings. The third element must also be present, else there is no act of bankruptcy within the meaning of this provision.”

Conversely, it may logically be argued that the first and third elements alone (namely, insolvency and failure to vacate the preference) do not suffice to constitute an act of bankruptcy, even though both have occurred within the four-month period. If the alleged preference (i. e., the docketing of the judgment) was obtained more than four months prior to the filing of the petition, this fact deprives the alleged act of bankruptcy, all of which must be committed' within the four-month period, of one-third of its essence. Under such circumstances, there is no act of bankruptcy at all.

Counsel for the appellee contend that if the adjudication is set aside certain creditors of the alleged bankrupt will thereby be able to secure title to property to the exclusion of the other creditors, and that thus the estate will be dissipated. This is unfortunate, of course, but it must be remembered that the two judgments referred to were obtained during the year 1929, long prior to the time the creditors herein filed their original petition; and that they did nothing to protect their interests, and were neither diligent nor timely in asserting their rights, notwithstanding the fact that the proceedings, including the filing of the suits, the recording of the judgments, the levies and the sales, were all matters of public record.

If there was any collusion or fraud in connection with such proceedings, no doubt the remedy can be obtained in the proper state tribunal. We are simply concerned here with whether or not an act of bankruptcy has been committed. We are of the opinion that it has not.

Judgment reversed.


author: PHILLIPS, Circuit Judge.

text:
    FRANKLIN v. CARTER, State Auditor of Oklahoma.
    No. 412.
    Circuit Court of Appeals, Tenth Circuit.
    July 8, 1931.

      Streeter B. Flynn, of Oklahoma City, Okl. (Geo. Otey, of Ardmore, Okl., and R. M. Rainey and Rainey, Flynn, Green & Anderson, all of Oklahoma City, Okl., on the brief), for appellant.
    F. M. Dudley, Asst. Atty. Gen., of Oklahoma (J. Berry King, Atty. Gen., of Oklahoma, on the brief), for appellee.
    Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges.
   PHILLIPS, Circuit Judge.

This is a suit to recover $3,405.81 paid under protest by appellant as income taxes for 1929.

The petition alleged that appellant was a resident of Oklahoma engaged in the production and sale of oil and gas in competition with corporations doing a like business in that state; that sections 9934 to 9945, inclusive, C. O. S. 1921, purport to impose a tax upon his income and to exempt the income of corporations from such tax; that such exemption is discriminatory and deprives him of due process of law and the equal protection of the laws in contravention of the Four-, teenth Amendment to the United States constitution. The trial court sustained a demurrer to the petition.

Section 9934, C. O. S. 1921, in part provides: “Each and every person in this state shall be liable to an annual tax upon the entire net income of such person arising or accruing from all sources during the preceding calendar year, and a like tax shall be levied, assessed, collected and paid annually upon the entire net income from all property owned and all other business, trade or profession carried on in this State by persons residing elsewhere.”

Section 9938, C. O. S. 1921, in part provides: “The term 'income’ as used in this act shall include: * * * (d) All dividends or profits derived from stocks or from the purchase and sale of any property, or other valuables acquired within one year previous, or from any business whatsoever.”

Counsel for appellant contend that the statute denies him the “equal protection of the laws” because it undertakes to impose a tax upon the incomes of individuals and to exempt therefrom corporations engaged in the same business.

The clause of the Fourteenth Amendment forbidding a state to “deny to any person within its jurisdiction the equal protection of the laws” is a guaranty that all persons subjected to state legislation “shall be treated alike, under like circumstances and conditions, both in privileges conferred and in liabilities imposed.” Power Mfg. Co. v. Saunders, 274 U. S. 490, 493, 47 S. Ct. 678, 71 L. Ed. 1165; Truax v. Corrigan, 257 U. S. 312, 333, 42 S. Ct. 124, 130, 66 L. Ed. 254, 27 A. L. R. 375; Hayes v. Missouri, 120 U. S. 68, 7 S. Ct. 350, 30 L. Ed. 578. It is a pledge of the protection of equal laws. Power Mfg. Co. v. Saunders, supra; Truax v. Corrigan, supra; Yick Wo v. Hopkins, 118 U. S. 356, 369, 6 S. Ct. 1064, 30 L. Ed. 220.

The principles which govern the application of the equal protection clause to the power of taxation by the states are well settled. Such power is essential to the existence of the government of a state. State Board of Tax Comm’rs of Ind. v. Jackson, 283 U. S. 527, 51 S. Ct. 540, 75 L. Ed. 1248; Ohio Oil Co. v. Conway, 281 U. S. 146, 159, 50 S. Ct. 310, 74 L. Ed. 775. Such clause does not compel a state to adopt an iron rule of equal taxation; nor require it to resort to close distinctions or to maintain a precise, scientific uniformity with reference to composition, use or value; nor prevent it from exercising a broad discretion in the classification of properties, businesses, trades, callings or occupations for the purpose of taxation. State Board of Tax Comm’rs v. Jackson, supra; Ohio Oil Co. v. Conway, supra; Bell’s Gap R. Co. v. Pennsylvania, 134 U. S. 232, 237, 10 S. Ct. 533, 33 L. Ed. 892; Southwestern Oil Co. v. Texas, 217 U. S. 114, 122, 30 S. Ct. 496, 54 L. Ed. 688; Brown-Forman v. Kentucky, 217 U. S. 563, 572, 573, 30 S. Ct. 578, 54 L. Ed. 883; Smith v. Cahoon, 283 U. S. 553, 51 S. Ct. 582, 75 L. Ed. 1264.

However, there is a point beyond which a state cannot go without violating the equal protection clause. While a state may classify broadly the subjects of taxation, in doing so it must proceed upon a rational basis. It is not at liberty to resort to a classification that is palpably arbitrary. The classification “must rest upon some ground of difference having a fair and substantial relation to tbe object of tbe legislation, so that all persons in similar circumstances shall be treated alike.” Ohio Oil Co. v. Conway, supra, page 160 of 281 U. S., 50 S. Ct. 310; Royster Guano Co. v. Virginia, 253 U. S. 412, 415, 40 S. Ct. 560, 64 L. Ed. 989; Louisville Gas Co. v. Coleman, 277 U. S. 32, 37, 48 S. Ct. 423, 72 L. Ed. 770; Air-Way Cor. v. Day, 266 U. S. 71, 85, 45 S. Ct. 12, 69 L. Ed. 169; Schlesinger v. Wisconsin, 270 U. S. 230, 240, 46 S. Ct. 260, 70 L. Ed. 557, 43 A. L. R. 1224; Quaker City Cab. Co. v. Penna., 277 U. S. 389; 400, 48 S. Ct. 553, 72 L. Ed. 927; Sneed v. Shaffer Oil & Ref. Co. (C. C. A.) 35 F.(2d) 21, 24; Smith v. Cahoon, supra.

The question here is whether the classification in the instant case rests upon a substantial difference and bears a reasonable relation to tbe object of tbe legislation. This precise question was considered in Conner v. State, 82 N. H. 126, 130 A. 357, and tbe court held the New Hampshire statute valid on tbe ground that avoidance of double taxation was a sufficient basis for such classification.

A general income tax law imposing a tax alike on corporations and natural persons will result in double taxation of the earnings of corporations paid as dividends, unless some method is devised to exempt either the corporation or its stockholders from the tax on such earnings. In framing the income tax law in question, the Oklahoma legislature undertook to avoid the injustice of taxing both the corporation and its shareholders on the earnings paid as dividends, by providing that the shareholders should pay taxes on such earnings when received by them in the form of dividends, and exempting the corporation from the tax.

A tax laid upon only the earnings of a corporation when paid to its stockholders as dividends results ultimately in a tax on a substantial portion of such earnings and avoids double taxation tbereon.

It is our opinion that there is a substantial difference between corporations and natural persons for income tax purposes because, ordinarily, a large portion of tbe earnings of a corporation are paid to its stockholders as dividends and are income of both tbe corporation and such stockholders; that it affords a rational basis for the classification provided by the statute here in question; that such classification rests on a difference having a fair and substantial relation to tbe object of tbe legislation; and that it results in like treatment to all persons similarly situated.

It follows that tbe statute does not violate the equal protection clause of the federal constitution.

The decree is affirmed, with costs.


author: PER CURIAM.

text:
    In re WESTERN STATES BUILDING-LOAN ASS’N.
    Nos. 6510, 6511.
    Circuit Court of Appeals, Ninth Circuit
    July 13, 1931.

      Bieksler, Smith, Parke & Catlin, of Los Angeles, Cal., for petitioner Memory, Moldenhauer & Co.
    Dryer, Castle & Richards, of Los An-geles, Cal., for petitioner Western States Building-Loan Ass’n.
    Gold, Quittner & Kearsley, of Los Angeles, Cal., for respondents.
    Before WILBUR and SAWTELLE, Circuit Judges.
   PER CURIAM.

The alleged bankrupt petitions for the allowance of an appeal of an order denying its motion to dismiss the involuntary petition in bankruptcy. The statute gives the right of appeal from an order of adjudication of bankruptcy (Bankr. Act, § 25, as amended by Act May 27, 1926, c. 406, § 10, 44 Stat. 665 [11 USCA § 48]). Such adjudication has not yet been made in the case at bar, and an appeal therefrom when made will afford petitioner an opportunity to present the question involved in its present application.

Petition denied.


author: KENNEDY, District Judge.

text:
    UNITED STATES v. PACIFIC MARKET CO.
    No. 1896.
    District Court, D. Wyoming.
    August 29, 1930.
    Albert D. Walton, U. S. Atty., of Cheyenne, Wyo., for the United States.
    Corthell, McCollough & Corthell, of Laramie, Wyo., for defendant.
   KENNEDY, District Judge.

This is an action at law in which the plaintiff seeks to recover of the defendant stipulated rentals of $6,010 under a written lease, less certain credits representing over-assessment of income taxes. The suit was tried to the court, a jury having been expressly waived. Defenses are set up raising both questions of fact and law on behalf of the defendant, but, as the scope of the pleadings is not called in controversy, it would seem unnecessary to review them.

A sketch of the pertinent facts would seem to be substantially as follows: The government is the owner of what is commonly known as the Pole Mountain Reservation, comprising about 65,000 acres, located several miles west of the city of Cheyenne, Wyo. The reservation for a number of years has been used for the purposes of target and maneuver practice by detachments of the United States Army. Prior to July 1, 1917, under purported authority of law, the Secretary of War leased the reservation to the defendant corporation for grazing and hay cutting purposes, covering a term of five years and until July 1, 1922. Some time in 1921 the officers in charge of Ft. D. A. Russell Military Reservation, having .supervision of the reservation, notified the defendant that the military establishment was desirous of storing some explosives upon the property, which right had not been reserved under the lease-then in existence, and that it would be necessary to caneel the old lease and execute a new one carrying this proviso, or that the-lease would be unconditionally canceled. Thereupon, the government and the defendant entered into a new lease whieh was executed by the Secretary of War on December 8, 1920, and by the defendant corporation on January 6,1921. This new lease purported to lease the premises until July 1, 1922,. with a renewal at the option of the government for an additional period of five years. The specified consideration was a rental of $6,010 per annum, payable in advance on the first day of July following. Tie purposes of tie lease were for grazing and iay cutting, but reserving therefrom what is known as the Fraser meadow. It further provided that it should be revocable at the will of the Secretary of War. It reserved the right to the United States to store explosives at such places and in such quantities as is desired on the land leased, and further provided that nothing in the privilege granted should operate to prevent or restrict the use of the land by military authorities for maneuvers, drills, target firing or other exercises as such authorities may deem necessary. In June, 1921, which was before the rent became due under the new lease, the defendant notified the officer in charge at Ft. Russell that he desired to cancel the lease. The matter was taken up by that official with the department at Washington, and in September of the same year the department ruled, and the official in charge notified the defendant, that a cancellation of the lease would not be accepted. The defendant had paid his yearly rentals under the old lease, which included the fourth year thereof, beginning on the 1st day of July, 1929, and which carried the lease so far as paid rentals were concerned until the 1st day of July, 1921. After December, 1929, when the new lease was executed, the defendant never used said premises in any way. There is evidence that the premises were used by other parties in grazing flocks and herds thereon. One of the parties so using the same testified that he made application to the officer in charge at Ft. Russell and was told that it would be satisfactory, provided he secured the consent of the defendant to such use. In a conference with the defendant, it was agreed that if the lease were canceled, that matter being then under consideration by the War Department, the parties seeking to use the premises were to pay the government for the use of the same. There is also evidence that explosives were stored upon the premises at times and places unknown to the defendant, and that at intervals soldiers fished and hunted upon the reservation. There is testimony to the effect that the caretaker of the reservation appointed by the War Department permitted the harvesting and sale of hay from the reservation, in regard to which the government offers testimony that it was beyond the powers and authority of this caretaker to act in such a manner. A publie highway was constructed across the reservation, probably during the period of the old lease.

Under this statement of facts, the defendant contends that the government is not entitled to recover. Shorn of legal technicalities, the principal defenses are: (1) That the Secretary of War had no authority in law to lease the premises; (2) that the lease is void for a lack of mutuality or perhaps, more properly speaking, that being revocable at will by the Secretary of War, it was likewise revocable at the will of the defendant; (3) that the plaintiff did not give to the defendant during the period of the lease the sole use of the premises, thereby forfeiting its right to recover the rental in controversy, no part of which at any time the defendant had paid under the terms of the new lease; (4) that the instrument sued on is not a lease, but a license, upon which recovery under the circumstances cannot be had.

The second of the above contentions seems to me to offer the greatest doubt as to the right of the plaintiff to recover and will, therefore, be first diseussed. Upon this phase of the ease, the defendant strongly emphasizes that portion of the instrument sued on. which provides that the lease shall be revocable at the will of the Secretary of War. Many cases are cited to the point that in an instrument of this character, made revocable at the will of one of the parties without condition, it is nonenforeeable and likewise revocable at the will of the other party. On the other hand, counsel for the government contends that this is the form of a lease frequently upheld by the courts, and citing authorities in support of that contention. I have not had an opportunity to examine in detail all of these authorities. I find that some of them carry conditions which are not present in the ease at bar. Leases which reserve the option to cancel and declare null and void a lease in the event a sale of the premises shall be made during its life have been sustained. In some of these cases, however, it was provided that, in the event of cancellation, the lessee should be paid a consideration. Lewis v. Agoure, 8 Cal. App. 146, 96 P. 327. In the ease of Goltra v. Weeks, 271 U. S. 536, 46 S. Ct. 613, 70 L. Ed. 1074, strongly relied upon by counsel for the government, where the government so reserved the right to terminate a lease, we find that the situation was likewise different than in the case at bar. There the substance of the reservation was that the lessor might terminate the lease in the event the lessee was not complying with the obligations of his contract according to the judgment of the chief of engineers. In such a case, it is held that where parties enter into a contract to delegate a third party as arbiter, they are bound by it even though the terms may seem harsh and unwise, because by a formal stipulation they have selected á. party as arbiter over conditions as to whether or not the terms of the lease are being complied with. -As it appears to me, such a ease is distinguishable from the case at bar, where the option is reserved to cancel without any condition named in the instrument. Here revocation may be based upon the mere caprice of the lessor without regard for the rights of the lessee. Of course,if such a lease becomes an executed contract, there could be no doubt of the right to recovery of the stipulated rentals. In the case at bar we have the situation presented of the defendant never occupying or using the premises under the new lease, although having paid rental under an old lease up to July 1, 1921, and previous to that time having notified the plaintiff of his desire to cancel the new lease. If it be a true and proper rule of law that a lease of this character is revocable at the will of either party, even though the instrument itself provides for such revocation solely at the will of one, then the defendant was within its rights in canceling the lease at its election and before the time when the new rentals actually began to run for the period to be covered. Many cases are cited by counsel for defendant upon the point, but the clearest and most succinct expression of the rule is selected from an opinion written by Judge Lurton while a member of the Circuit Court of Appeals of the Sixth Circuit'(afterward Associate Justice of the Supreme Court) in the case of Tennessee Oil, Gas & Mineral Co. v. Brown, 131 F. 696, where at page 701 it is said:

“But, independently of any otlier ground, the general provision of this lease, authorizing the lessee to abandon whenever he should see fit, makes it a lease' at the will of the lessee. 'An estate terminable at the will of one of the parties is determinable at the will of either, though it purports to be terminable at the will of one only. 1 Washburn, Beal Property, 371 (side paging); Taylor’s Landlord & Tenant, § 14; 18 Am. & Eng. Ency. of Law (2d Ed.) 182.”

No reason has been presented which would seem to justify the conclusion that a different rule should prevail in regard to the interpretation of contracts between the government and citizens and those between private citizens. No condition in any form, either in regard to the intended use of the premises on the part of the government, or for the protection of the lessee, appears to surround the right of revocation at any time by the lessor. Under these circumstances, I conclude that the defendant was itself within its legal rights in exercising the right of revocation, which it did before the premises were used under the lease, before the term began to run for which the rental moneys so sought to be recovered, and likewise before the rent became payable.

The remaining defenses briefly outlined have not seemed to me to present merit, with the possible exception of the questioned right of the Secretary of War under the circumstances in this ease to lease the premises. As to this defense, I have not had time to investigate fully, and find it unnecessary in the light of what has heretofore been said to consider the point.

I find no merit in the counterclaim of the defendant, nor do I feel that relief can be given in this suit for the amount which defendant admittedly has coming from the government on account of overassessed income taxes, which matter must take its regular course.

Por the reasons stated, the general finding and judgment of the court will be for' defendant, and the plaintiff’s petition- will be dismissed, reserving to it proper exceptions.


author: POLLOCK, District Judge.

text:
    UNITED STATES v. PACIFIC MARKET CO.
    No. 416.
    Circuit Court of Appeals, Tenth Circuit.
    May 27, 1931.

      Albert D. Walton, U. S. Atty., for tbe District of Wyoming, and Ewing T. Kerr, Asst. U. S. Atty., for the District of Wyoming, both of Cheyenne, Wyo., for tbe United States.
    N. E. Corthell, A. W, McCollough, and M. E. Corthell, all of Laramie, Wyo., for appellee.
    Before LEWIS and COTTERAL, Circuit Judges, and POLLOCK, District Judge.
   POLLOCK, District Judge.

This is an action at law brought to recover one installment of rent accruing under tbe terms of a lease of about 56,000 acres of pasture land known as Ft. D. A. Russell (Pole Mountain) Target and Maneuver Reservation in tbe state of Wyoming. Tbe lease was made May 21,1917, by tbe Honorable Secretary of War under authority of, an Act of Congress approved July 28, 1892 (27 Stat. 321 [40 USCA § 303]), which provides, as follows:

“Chap. 316. — An act authorizing tbe Secretary of War to lease public property in certain cases.
“Be it enacted by tbe Senate and House of Representatives of tbe United States of America in Congress assembled, That authority be, and is hereby, given to the Secretary of War, when in bis’discretion it will be for the public good, to lease, for a period not exceeding five years and revocable at any time, such property of the United States under his control as may not for tbe time be required for public use and for the leasing of which there is no authority under existing law, and such leases shall be reported annually to Congress: Provided, That nothing in this act contained shall be held to apply to mineral or phosphate lands.”

The parties will be referred to as on tbe record in tbe court below. 51 F.(2d) 348.

All rentals accruing prior to July 1,1921, were paid to tbe government. This action was brought to recover tbe installment of rentals alleged to have accrued from July 1, 1921, to June 30, 1922.

During tbe time tbe original lease was in force and in November, 1920, tbe government notified defendant it wished to use a portion of tbe leased premises for tbe purpose of storing explosives thereon, and on December 8, 1920, as provided by tbe terms of tbe lease, defendant was notified the government bad canceled tbe same, and a new lease for the remainder of tbe five-year term from tbe date of tbe original lease was made between the parties. This new lease reserves the right of the United States to store explosives at such places and in such quantities as is desired on tbe leased premises. This lease provides that “this lease shall be revocable at tbe will of tbe Secretary of War.” After tbe making of this new lease the defendant did not occupy tbe premises, and in tbe spring of 1921 defendant served notice on tbe commanding officer of Ft. D. A. Russell, Wyo., it did not desire the use of tbe premises for tbe ensuing year, and it did not use them.

Tbe government having admitted in its petition defendant market company was entitled to an income tax refund of $834.55, this amount was deducted from tbe amount of rent sought to be recovered. Hence, judgment was prayed by tbe plaintiff in only tbe sum of $5,175.45*.

Issues having been joined by an answer to tbe petition, and also a cross-petition having been filed by tbe defendant against tbe government, a jury was waived, and tbe case was submitted to and tried by tbe court. There was no evidence sufficient to support tbe cross-petition. It was therefore dismissed. Tbe court found generally for tbe defendant and against the government. There were no special findings of fact either requested or made, and no request of tbe trial court for declarations of law in favor of the plaintiff. This being tbe state of the record, the errors assigned by the plaintiff, as found in tbe record, are, as follows:

“Assignment of Errors.
“That tbe judgment entered in tbe above entitled cause on tbe 29th day of August, A. D. 1930, dismissing plaintiff’s petition is erroneous and unjust to tbe plaintiff for tbe following reasons:
“1. That said judgment is not supported by tbe evidence.
“2. That said judgment is against tbe weight of evidence.
“3. That said judgment is contrary to law.
“4. That tbe court erred in rendering said judgment.
“5. That tbe court erred in not rendering judgment in favor of tbe plaintiff and against the defendant.
“6. That tbe court erred in bolding as a matter of law that tbe lease sued upon and set out in plaintiff’s petition was, and is^ a lease terminable and revocable at the option of tbe lessee, and that tbe same bad been terminated and revoked prior to the first day of July, 1921.”

While the contentions of the defendant are set out in the brief of the plaintiff, yet an inspection of the reeord in this ease discloses no possible question for review by this court. It is conclusively established by the authorities controlling here when in an action at law in a national eourt a jury is waived and the case is tried to the court, while the eourt may from the evidence make special findings of fact, it is not required to do so. Modoc County Bank v. Ringling (C. C. A. 9) 7 F.(2d) 535, 536; Bank of Waterproof v. Fidelity & Deposit Co. (C. C. A. 5) 299 F. 478, 480; Compania Trans. de Petroleo v. Mexican Gulf Oil Co. (C. C. A. 2) 292 F. 846, 848; United States v. Smith (C. C. A. 1) 39 F.(2d) 851, 853; Denver L. S. Com. Co. v. Lee (C. C. A. 8) 20 F.(2d) 531; Merriam v. Huselton (C. C. A. 8) 45 F.(2d) 983.

Again, when a ease is tried by the court without the intervention of a.jury, as this case was tried, and there are no findings of fact made save the general finding for the one party or the other, there is no right of review by an appellate court, except as to the rulings of the eourt made during the progress of the trial excepted to at the time and presented by the bill of exceptions. Wilson v. Merchants’ Loan & Trust Co., 183 U. S. 121, 22 S. Ct. 55, 46 L. Ed. 113; Law v. United States, 266 U. S. 494, 45 S. Ct. 175, 69 L. Ed. 401; Lehnen v. Dickson, 148 U. S. 71, 13 S. Ct. 481, 37 L. Ed. 373; Vicksburg, etc., Ry. Co. v. Anderson-Tully Co., 256 U. S. 408, 41 S. Ct. 524, 65 L. Ed. 1020; Cooper v. Omohundro, 19 Wall. 65, 69, 22 L. Ed. 47.

In Cooper v. Omohundro, supra, Mr. Justice Clifford, delivering the opinion for the eourt, said:

“Where issues of fact are submitted to the Circuit Court and the finding is general, nothing is open to review * * * except the rulings of the Circuit Court in the progress of the trial, and that the phrase ‘rulings of the eourt in the progress of the trial’ does not include the general finding of the Circuit Court nor the conclusions of the Circuit Court embodied in such general finding.”-

In Wear v. Imperial Window Glass Co. (C. C. A.) 224 F. 60, 63, Judge Sanborn, delivering the opinion for the eourt, said:

“There is another reason why no reviewable question of law is presented to this eourt in this ease. A trial court is entitled to a clear specification by exception of any ruling or rulings which a party challenges and desires to review, to the end that the trial eourt itself may correct them if so advised, and, if it fails to do so, that there may be a clear record of the rulings and the challenges thereof. For this purpose a rule has been firmly established that an exception to any ruling which counsel desire to review, which sharply calls the attention of the trial court to the specific error alleged, is indispensable to the review of such a ruling.”

For a clear and explicit holding on what and how the reeord must be preserved to raise a question reviewable by this eourt in a case where a jury is waived and the finding of the trial eourt is general, as in this ease, see, Alexander T. White, appellant, v. United States of America, 48 F.(2d) 178, January Term, 1931, opinion by Judge Phillips.

There was no declaration of law requested by the government to find on the evidence, judgment in its favor, made, denied, or excepted to, and no other matter or thing ruled by the court and excepted to by the government on the trial of the case. From the opinion delivered by the able trial court, it may be seen the eourt was of the opinion as the lease or license under which the government claimed was not enforceable against defendant unless the defendant occupied the premises under it because it was as made unilateral, yet, as there was no question of law raised on this view of the law, the same, even if erroneous, which we do not hold, cannot be reviewed on this reeord.

As shown by this record, as there was no ruling of the eourt made and excepted to dur-' ing the trial in order to have the question reviewed, there is nothing whatever in this record which this court may re-examine for error.

Affirmed.


text:
    S. S. KRESGE CO. v. BENNETT, Attorney General of New York, et al.
    District Court, S. D. New York.
    July 2, 1931.

      Beekman, Bogue & Clark, of New York City (Edward K. Hanlon and Hubert C. Mandeville, both of New York City, of counsel), for plaintiff.
    John J. Bennett, Jr. (Wendell P. Brown, of Albany, N. Y., of counsel), for the Attorney General.
    Before MACK, Circuit Judge, and FRANK J. COLEMAN and COXE, District Judges.
   PER CURIAM.

The taxes as determined by the commission were in exact aeeord with the method tentatively prescribed by the statute for the apportionment of. the plaintiff’s entire net income. In determining the base the commission accepted the plaintiff’s reported net income for its entire system and took such proportion of it as the designated New York assets bore to all such assets in the plaintiff’s entire business. This statute, and more specifically this method of apportionment, has already been held constitutional. Bass, Ratcliff & Gretton, Ltd., v. State Tax Commission, 266 U. S. 271, 45 S. Ct. 82, 69 L. Ed. 282. The plaintiff contends, however, that the taxes in this instance are unconstitutional because the base determined by the commission is larger than the actual net income derived from plaintiff’s property, business, and activities within New York State; in other words, that part of the plaintiff’s net income derived from without the state is taxed by the New York authorities.

We think it is a sufficient answer to this contention: (1) That the plaintiff has not, in the record before us, shown the net income from New York State, and (2) that the proceedings before the commission were not sufficient to sustain this action. The defendants concede that the statutory remedy of cer-tiorari to the state court is inadequate and that the plaintiff has no adequate remedy against an erroneous decision of the commission on the application for revision except in this action. See Educational Films Corp. v. Ward, 282 U. S. 379, 51 S. Ct. 170, 75 L. Ed. 400.

1. In attempting to prove its net income derived from New York State, tlie plaintiff accurately shows its gross income collected here, i. e. the amount of the gross sales within the state, from which are deducted not only the items of cost and expense directly allocable to the individual stores in New York, but also the percentages to defray the expenses of the central organization. These latter charges against the gross income in New York are merely estimated expenses of the ■business. The plaintiff urges that they axe a close estimate because the proceeds from these percentage charges in the entire system one year come within $67,000 of the actual expenses; but they remain nevertheless mere estimates. It might well .be that the service rendered to the New York stores by the central organization should be charged for at a different rate from that applicable to other parts of the system; for instance, the services performed by the executive offices and purchasing department are charged for at the rate of 2 per cent, not on the invoice cost of the goods furnished to the stores, but on the gross sales of the stores. If the New York stores were receiving higher prices for the same goods than stores elsewhere, they would be paying a disproportionate part of the expenses of furnishing the goods.

Furthermore, the net income allocated to New York should reflect all the plaintiff’s activities within the state. In addition to the operation of the individual stores, the plaintiff operated here a warehouse for the entire system and also purchased goods here for the entire system. Such profit as may have resulted from these activities is not completely reflected in the aggregate net profit of the individual stores within the state, which plaintiff contends is the entire net income attributable to New York.

Since the plaintiff cannot show by the facts before us what was its net income from New York State, but can merely estimate it, we do not think that there is anything before us to sustain the contention that the method of apportionment adopted by the commission was unconstitutional. If the actual net income from the state cannot be demonstrated with reasonable certainty, the commission can properly be intrusted with some discretion in determining what method to use in approximating it. It may possibly be that the plaintiff’s figures are a somewhat closer approximation than the commission’s, but that would not warrant our holding the tax illegal if the commission’s method was a reasonable one. Bass et al. v. Commission, supra; Underwood, etc., v. Chamberlain, 254 U. S. 113, 41 S. Ct. 45, 65 L. Ed. 165; Hans Rees’ Sons, Inc., v. North Carolina, 283 U. S. 123, 51 S. Ct. 385, 75 L. Ed. 879. As a matter of fact, the figures arrived at by the commission far more nearly reflect the amount of business done within the state than do the plaintiff’s because if the apportionment of the entire net income is made in accordance with gross sales both within and without the state, almost the same figures are reached as by the method used by the commission. More specifically, the gross sales within the state for the two years in question compared with the gross sales of the whole system were 8.40 per cent, and 8.93 per cent., respectively; the percentage of net income attributed to New York by the commission was approximately 9.72 per cent, and 8.97 per cent., respectively; while that claimed by plaintiff was only 6.30 per cent, and 6.31 per cent., respectively.

2. But aside from the question whether the facts proved before us require a different method of computation from that adopted by the commission, the plaintiff cannot succeed in the present action because these facts were neither proved nor offered to be proved before the commission. Concededly a prerequisite to the maintenance of this action was an application to the commission for a revision. Gorham Manufacturing Co. v. Tax Commission, 266 U. S. 265, 45 S. Ct. 80, 69 L. Ed. 279. An application was made and this question of the proper method of computation was mentioned at the hearing before the commission; but there was no evidence either introduced or offered which would have justified the commission in changing its assessment. Even if this court is not restricted to a review of the commission’s determination as in a certiorari proceeding, still before the plaintiff can resort to the extraordinary remedy of injunction against the state authorities it must show that the threatened injury is not the result of the plaintiff’s own default in failing to present sufficient evidence to the administrative tribunal. The mere making of an application for a revision does not suffice.

Considering more in detail the proceedings before the commission, it appears that the question of the proper method of apportioning the entire net income was first raised in the plaintiff’s return for the tax year beginning November 1, 1928, by a short typewritten statement not called for on the form used. The statement set forth the taxpayer’s contention as to its income derived from New York State and the percentage which this bore to the entire net income, but of course no proof of the figures was included. At the hearing on the application for revision the matter was again mentioned, and an officer of the company attempted to state his conclusions without proving the figures to support them. The presiding commissioner said in reference to that testimony, “I am objecting to the whole thing unless you establish how you determine it, because the whole thing is susceptible of jugglery,” and at another point, “Cut out the speculation and get down to the faets — the things that can he demonstrated rather than argued.” In reference to another point the commissioner said: “The whole point about the thing is that this company was stacking up real estate outside the State against leaseholds here and getting deductions for lease rentals, all of' which was taken out of the net income of this company. Frankly, so far as 1924 is concerned, there can not be any question of proportion of segregation because that question is not open. As to subsequent years, the question is. We have not the least objection to your putting in anything that tends to show values. I don’t think that you would consider that we would be in any position to try to fix a sales tax on the existing law, and that is what you are heading to.” This statement was not, and cannot be, considered as excluding the evidence of definite figures necessary to support the plaintiff’s contention.

The hearing terminated on the same day, December 20, 1929, without any offer of proof as to the necessary faets and figures. Nearly nine months thereafter the taxpayer, having secured new counsel, a conference was had with the commissioner in charge of the matter at which the contention was again urged without any proof of the faets and finally on January 13,1931, more than a year after the hearing, a second conference took place, also without any proof of the faets. Prior to this second conference, the taxpayer’s new counsel had sent to the commissioner a brief and certain unverified schedules purporting to show the figures sustaining the táxpayeris contention for the calendar years 1927 and 1928. Aside from the fact that the necessary figures for the calendar year 1926 were not shown, these schedules were merely illustrative ,of the taxpayer’s argument and in no sense evidentiary.

At the hearing upon the application for revision the taxpayer had the burden of proving not only that error existed in the original assessment, but also the amount of the error. The New York Court of Appeals has described this burden of a taxpayer making an application for revision under article 9-A of the Tax Law in People ex rel. Kohlman & Co. v. Law, 239 N. Y. 346, 146 N. E. 622, 624, as follows: “If upon this record the commission was unable, for lack of data essential to an intelligent revision, to resettle the account for taxes, it did not err in confirming the account and dismissing the application. If it did not err in confirming the account, the Appellate Division had no choice, save to approve the confirmation. Either there was error in the disposition by the taxing officers of the application for revision, or there was not. If there was error, the amount of the account as it should be resettled must appear from the record, unless, indeed, we take the view that the relator sustains its burden by showing that something was improperly included, without showing how much". If there was no error, the statute does not vest the court with the power to approve, and at the same time to reverse, There must be some finality in the determination of the revenues of the state. If taxpayers who have failed to take advantage of a first chance are to be given the benefit of a second, it is from the Legislature rather than from the courts that the privilege must come.”

Upon all the evidence offered to the commission the latter could not have determined the taxes in accordance with the method now claimed by the plaintiff. The plaintiff urges-in its brief that Gorham Manufacturing Co. v. Tax Commission, supra, in requiring the taxpayer to make an application for revision before bringing a suit in equity went no further-than to require that the administrative tribunal be given “the opportunity to avoid the error complained of.” Even if this were so, the plaintiff did not comply with the rule by furnishing competent proof which might enable the commission to determine whether the plaintiff’s contention had any merit or not.

Accordingly, the motion for a preliminary injunction is denied, and the motion to dismiss the bill of complaint is granted.


author: CUSHMAN, District Judge.

text:
    HORLICK’S MALTED MILK CORPORATION v. HORLUCK’S, Inc.
    No. 657.
    District Court, W. D. Washington, N. D.
    July 11, 1931.
    Edward S. Roger’s, Allen M. Reed,, and William T. Woodson, all of Chicago, Ill., and Palmer, Askren & Brethorst, of Seattle, Wash., for plaintiff.
    C. A. Reynolds, Harry Ballinger, Charles T. Hutson,, and George H. Boldt, all of Seattle, Wash., for defendant.
    This matter is now before the court upon the settlement of the decree as to the nature of the accounting, the court having held the defendant had unfairly competed with plaintiff in its business by defendant’s use of the word “Horluck’s” in association with the words “Malted Milk,” although the surname of the organizers and principal stockholders of defendant was “Horluck.” 43 F.(2d) 767, 769. In so holding, the court said:
    “The admitted fact that before defendant’s acts complained of the words ‘Horliek’s Malted Milk’ [plaintiff’s trade named product] had come to mean and be understood as descriptive of plaintiff’s product and no other, coupled with the similarity of the names ‘Horliek’ and ‘Horluek,’ makes it reasonably certain that advertising by the defendant, such as above set out, with the word ‘Horluck’s’ prominently and closely associated with the words ‘Malted Milk,’ would mislead a part of the buying public. Therefore, if no more were shown, it is to be presumed that defendant intended to so mislead.”
    Plaintiff now contends that the decree should provide for an accounting for defendant’s profits. The defendant objects, contending that in no event is defendant liable to account for more than the damage which the plaintiff has suffered by the defendant’s unfair competition.
    Plaintiff cites Nims, on Unfair Competition, page 1078; N. K. Fairbank Co. v. Windsor et al. (C. C. A.) 124 F. 200, 202; N. K. Fairbank Co. v. Luckel et al. (C. C. A.) 102 F. 327, 331; Photoplay Publishing Co. v. La Verne et al. (C. C. A.) 269 F. 730, 732; Manitowoc Pea-Packing Co. v. William Numsen & Sons (C. C. A.) 93 F. 196; P. E. Sharpless Company v. Lawrence (C. C. A.) 213 F. 423; Singer Mfg. Co. v. June, 163 U. S. 169, 200, 16 S. Ct. 1002, 41 L. Ed. 118; Hamilton-Brown Shoe Co. v. Wolf Brothers & Co., 240 U. S. 251, 259, 36 S. Ct. 269, 60 L. Ed. 629; Matzger v. Vinikow (C. C. A.) 17 F.(2d) 581, 584; J. F. Rowley Co. v. Rowley (C. C. A.) 193 F. 390, 392; Julius Kessler & Co. v. Goldstrom (C. C. A.) 177 F. 392; Gehl v. Hebe Co. (C. C. A.) 276 F. 271; Nims on Unfair Competition, page 1076, and page 1027; Wallace & Co. v. Repetti, Inc. (C. C. A.) 266 F. 307; Bunch v. United States (C. C. A.) 252 F. 673, 678 ; 21 Corpus Juris, 217; Brown v. County of Buena Vista, 95 U. S. 157, 160, 24 L. Ed. 422; Faulder & Co., Ltd. v. O. and G. Rushton, Ltd., 20 R. P. C. 477, 490; Weingarten Bros. v. Charles Bayer & Co., 22 R. P. C. 341, 350; Sawyer v. Kellogg (C. C.) 9 F. 601, 602.
    Defendant cites Sharpless Company v. Lawrence (C. C. A.) 213 F. 423; Rubber Company v. Devoe et al. (D. C.) 233 F. 150; Prest-O-Lite v. Bournonville (D. C.) 260 F. 442; Rushmore v. Badger Company (C. C. A.) 198 F. 379; Matzger v. Vinikow (C. C. A.) 17 F.(2d) 581; Wrigley Company v. Larson Company (D. C.) 5 F.(2d) 731; Straus v. Notaseme Hosiery Company, 240 U. S. 179, 36 S. Ct. 288, 60 L. Ed. 590; Saxlehner v. Siegel-Cooper Company, 179 U. S. 42, 21 S. Ct. 16, 45 L. Ed. 77; Fairbank Company v. Windsor (C. C. A.) 124 F. 200 ; Ammon & Person v. Narragansett Company (D. C.) 254 F. 208; Pease v. Scott Company (D. C.) 5 F.(2d) 524; Globe-Wernicke Co. v. Safe-Cabinet Co., 110 Ohio St. 609, 144 N. E. 711; Jones v. Roshenberger, 82 Ind. App. 97, 144 N. E. 858; Dickey v. Mutual Film Corp., 186 App. Div. 701, 174 N. Y. S. 784; Ludington v. Leonard (C. C. A.) 127 F. 155; Keystone Foundry v. Portland Company (C. C.) 180 F. 301, 304; Gaines & Co. v. Rock Spring Company (C. C. A.) 226 F. 531, 543; Peninsular Chemical Co. v. Levinson (C. C. A.) 247 F. 658; Southern Machinery Company v. Fay Stocking Co. (C. C. A.) 259 F. 243, 246; Ammon & Person v. Narragansett Company (C. C. A.) 262 F. 880, 884; Marshall Company v. D’Arcy (C. C. A.) 280 F. 945; O’Sullivan Company v. Genuine Rubber Company (C. C. A.) 287 F. 134; I. T. S. Co. v. Tee Pee Rubber Co. (C. C. A.) 288 F. 794; Dickinson v. O. & W. Thum Co. (C. C. A.) 8 F.(2d) 570; G. & C. Merriam Co. v. Ogilvie (C. C. A.) 170 F. 167; Kessler & Co. v. Goldstrom (C. C. A.) 177 F. 392; Reed Shoe Co. v. Frew (C. C.) 158 F. 552; Hennessy v. Wine Growers’ Ass’n (D. C.) 212 F. 308; Vogue Co. v. Thompson-Hudson Co. (C. C. A.) 300 F. 509; Rosenberg Bros. v. Elliott (C. C. A.) 7 F.(2d) 962; Rowley v. Rowley (C. C. A.) 18 F.(2d) 700; International Silver Company v. Rogers Corporation, 66 N. J. Eq. 140, 57 A. 725; Regis v. Jaynes, 191 Mass. 245, 77 N. E. 774; International Silver Company v. Rogers Corporation, 67 N. J. Eq. 646, 60 A. 187, 110 Am. St. Rep. 506, 3 Ann. Cas. 804; Rubber & Celluloid Harness Trimming Co. v. Rubber-Bound Brush Co., 81 N. J. Eq. 419, 519, 88 A. 210, 213, Ann. Cas. 1915B, 365; Hilton v. Hilton, 90 N. J. Eq. 564, 107 A. 263, 264; Worchester Brewing Corp. v. Rueter (C. C. A.) 157 F. 217; Ferguson Company v. Scriven Co. (C. C. A.) 165 F. 655; Layton Pure Food Co. v. Church & Dwight Co. (C. C. A.) 182 F. 24; Saxlehner v. Eisner & Mendelson Company, 179 U. S. 19, 21 S. Ct. 7, 45 L. Ed. 60; Menendez v. Holt, 128 U. S. 514, 9 S. Ct. 143, 32 L. Ed. 526; McLean v. Fleming, 96 U. S. 245, 24 L. Ed. 828; Hanover Star Milling Co. v. Metcalf, 240 U. S. 403, 36 S. Ct. 357, 60 L. Ed. 713; United Drug Co. v. Rectanus Co., 248 U. S. 90, 39 S. Ct. 48, 63 L. Ed. 141; New York Grape Sugar Co. v. Buffalo Grape Sugar Co. (C. C.) 18 F. 638 at page 646; De Kuyper v. Witteman (C. C.) 23 F. 871; Keller v. Stolzenbach (C. C.) 28 F. 81, 82; Covert v. Travers Bros. Co. (C. C.) 96 F. 568, 569; Weber Medical Tea Co. v. Weber et al. (C. C.) 102 F. 156; Pontefact et al. v. Isenberger (C. C.) 106 F. 499; Worcester Brewing Corp. v. Rueter & Co. (C. C. A.) 157 F. 217; Eagle White Lead Co. v. Pflugh (C. C.) 180 F. 579 at page 586; Layton Pure Food Co. v. Church & Dwight Co. (C. C. A.) 182 F. 35 at page 41, 32 L. R. A. (N. S.) 274; Aunt Jemima Mills Co. v. Rigney & Co. (C. C. A.) 247 F. 407 at page 412, L. R. A. 1918C, 1039; Wolf, Sayer & Heller v. United States Slicing Mach. Co. (C. C. A.) 261 F. 195 at page 197; Ansehl v. Williams (C. C. A.) 267 F. 9 at page 13; Nat. Circle, Daughters of Isabella, v. Nat. Order, D. I. (C. C. A.) 270 F. 723 at page 733; George J. Meyer Mfg. Co. v. Miller Mfg. Co. (C. C. A.) 24 F.(2d) 505 at page 507; Temco Mfg. Co. v. National Electric Ticket Register Co. (D. C.) 33 F.(2d) 777 at page 778; Merriam v. Smith (C. C.) 11 F. 588, 589; Low v. Fels (C. C.) 35 F. 361; Allen v. Walker & Gibson (D. C.) 235 F. 230 ; 66 A. L. R. at page 1028; Bissell Plow Works v. Bissell Plow Co. (C. C.) 121 F. 357; Regis v. Jaynes, 191 Mass. 245, 77 N. E. 774; Nims on Unfair Competition, page 1078.
   CUSHMAN, District Judge.

Upon the main ease this court held:

“The defendant has a right to use the name of ‘Horluek’ in its business and to advertise in conjunction its name and its business and if confusion on the part of a portion of the buying public results because of the similarity in the names ‘Horliek’ and ‘Horluek’ after all has been done that reason and equity require to avoid confusion, even though the unavoidable confusion works to defendant’s advantage and plaintiff’s loss, plaintiff has no remedy because of it. It is not necessary that plaintiff prove defendant’s actual intent to mis-lead buyers to defendant’s profit and plaintiff’s loss. Men are presumed to intend the natural consequences of their voluntary acts.”

The court has found that the defendant committed a tort in unfairly competing with plaintiff. The plaintiff is therefore entitled to full compensation for the damages which it has suffered. To decree plaintiff the defendant’s profits would be to punish defendant and not to compensate the plaintiff.

Conceding, that a court of equity, in a proper ease, may decree the recovery of his profits from a defendant, the question still remains, Has it been shown by the requisite amount of evidence that the conduct of the defendant herein has been so culpable — so willfully fraudulent — as to merit such decree?

The first mistake, if monopoly was the aim, was made by the predecessors of plaintiff in adopting an individual name — a surname — that of the founders of the business, as a trade name. Its goods so marked were “distinguished” from the goods of all others just so long as a man of the same or a similar name did not engage in the same business, using his name in that business.

Being long first in the field, time and the results worked in the course of time partly cured this mistake, and the defendant, because of this, is no longer entirely free to associate the surname of its founders with its business as it sees fit. Plaintiff will be protected by a court of equity from loss on account of that confusion which its predecessor in the first instance invited in adopting the use of an individual name — a surname — -to designate its wares, but though a court of equity will not only enjoin defendant from further unfair competition, but will do complete justice and aid in restoring to plaintiff that which it has lost through defendant’s failure to do all that was reasonable to dis-tingpfish its from plaintiff’s goods, it does not follow that plaintiff should recover defendant’s profits.

Plaintiff is entitled to an injunction and its damages, because it has been shown to be so entitled by a fair preponderance of the evidence. It cannot recover defendant’s profits unless it has been shown beyond a reasonable doubt that defendant was guilty of willful fraud in the use of the enjoined trade-name.

The statutes of the state of Washington (Remington’s Compiled Statutes of Washington, 1922, §§ 9976 to 9980, inclusive) make it unlawful for a person to conduct or transact business in this state under any other than his own name unless he shall file a certificate in the office of the county clerk.

Each man in the court of conscience is “counsel for himself” and his conclusions regarding his rights and 'duties with relation to the rights of others may be much distorted short of willful fraud. The right to deny to a man the free use of his own name in connection with his business is not so plain and clear as to show willful fraud, although he may be fully aware of the use by another of a similar name in a similar business. Under such circumstances, the sword of equity is free to lop off the objectionable practice and to enforce the restoration of damages suffered by the earlier user of the trade-name in question, but it will not touch his shoulder and bid him rise up a knight errant to avenge, for in such a ease it is not equity to create a private prosecutor, for his sense of duty is also likely to be distorted when he receives a reward in proportion to the punishment he inflicts.

The evidence in this ease has not shown beyond a reasonable doubt willful fraud on the part of the defendant.

Paragraph 2 of the submitted form of decree, which paragraph provides: .

“That the plaintiff recover from the defendant Horluek’s Inc., all profits derived by the defendant from the operation of its shops under the names Horluek’s Malted Milk Shops or Horluek’s Malted Milk, and that this cause be and it is hereby referred to -as Master to ascertain and assess said profits, with full power to subpoena and order the attendance of witnesses, the taking of depositions and the production of books, papers and documents pertinent to ascertaining and assessing said profits, and to report to this court the amount of said profits when ascertained and assessed.”

—not being in conformity with the conclusions herein reached, the decree will not be signed as submitted.

Any further hearing upon the settlement of the decree will be upon notice.

The clerk is directed to notify the attorneys for the parties of this ruling.


text:
    TACOMA ORIENTAL S. S. CO. v. TALLANT, County Treasurer, et al.
    No. 455.
    District Court, W. D. Washington, S. D.
    July 15, 1931.
    As Amended Sept. 23, 1931.

      In brief, the facts as stipulated are:
    That the secretary of the complainant would testify that the officers and directors of the complainant and the owners of all but 1,200 of its 5,000 shares of stock reside at Tacoma, Wash.; that all directors’ meetings and all shareholders’ meetings, save the first, have been held at Tacoma; that complainant purchased certain vessels from the United States through the United States Shipping Board; that a portion of the purchase price still unpaid is secured by a mortgage thereon; that the principal place of business of the company is at Reno, Nev.; that the steamships of the complainant have been and now are engaged exclusively in foreign commerce between the ports of Puget Sound and North China and Japan, and Puget Sound and South China, Japan, and the Philippines, and San Francisco and the oriental ports just above mentioned; that it was part of the consideration for the sale of said vessels by the government of the United States, acting through the United States Shipping Board, that' the complainant was required to and it did contract and agree with the seller to maintain said vessels as common carriers of freight between the Puget Sound ports and the oriental ports above named and at all of said times it has so done; that by said contract it is likewise under binding contract to make not less than twenty-four round voyages per year upon a regular schedule, and the continued operation of all of said vessels is necessary to enable said complainant to keep its said covenant and agreement, and said contract is and will be for several years in full force and effect; that complainant is likewise under long-time contract with the United States of America, represented by the Postmaster General to carry (and it does carry) the mails of the United States on said vessels between Tacoma and said oriental points and to make the same number of voyages required by the operating contract here-inbefore referred to, and the continued operation of all' of said ships is necessary to enable complainant to carry out and perform its said covenants; that each of said contracts above mentioned provides severe penalties to be imposed upon complainant for their breach; that complainant has many commitments as a carrier of freight as to each of said vessels, and the interruption of the continuity and regularity of its voyages or any of them would cause it great loss and damage; that neither the complainant or any of said steamships have at any time engaged in any business other than the foreign business just above mentioned; that complainant does not own or operate any other steamships and is not engaged in any business of any kind at any of the times hereinafter mentioned or now excepting only as herein stated; that complainant operates the vessels in question through an agent, the States Steamship Company, another Nevada corporation; that this agent maintains, in the name of complainant, offices in Tacoma and Seattle; that complainant has agents for and solicits business in Tacoma, Seattle, Vancouver, B. C., San Francisco, Los Angeles, Portland, and Astoria, and also> in New York City, and the agents at all of these points have authority .to solicit and accept business and issue bills of lading. Supplies are purchased principally in San Francisco, Seattle, and Tacoma, but partly at other ports of call; fuel oil is taken at San Francisco and some other stores are bought there; most of the deck, engine room, and steward stores and supplies are purchased in Seattle and Tacoma and at other points as necessity arises; so far as practicable the policy of the company is to make repairs at Seattle and Tacoma; light repairs are made at Tacoma and dry-docking and heavy repairs at Seattle; some repairs are made in the Orient and at other points of call; crews are usually hired either in Seattle or at Tacoma and are generally signed on at Tacoma.
    The method of operating the business is as follows: Thé vessels take cargo outwardly for the Orient at Coos Bay, Astoria, Grays Harbor, Olympia, Tacoma, Seattle, Everett, Bellingham, and Vancouver, B.. C. Occasionally they go to other ports if sufficient inducements offer, but they all call at Puget Sound ports and at Vancouver, B. C. No intrastate or coastwise business is accepted. A typical ease is that of the steamship Tacoma, Voyage 8, just completed, which was as follows: Itinerary: Loaded on Puget Sound (in this instance principally at Tacoma, Seattle, and Vancouver); thence to Yokohama, Osaka, Kobe, Shanghai, Tsingtao, Darien, Taku Bar, Weihaiwei, Hakodate, San Francisco, Portland, Puget Sound.
    The complainant company has a desk and some furniture in the office of the secretary in Tacoma, but it pays no office rent itself in Tacoma.
    The complainant company pays a tax on the office furniture in the secretary’s office in Tacoma. No tax has so far been assessed in Nevada, but the company is advised that its ships are subject to taxation there.
    Under the laws of the United States it is necessary for vessels to register and to designate a home port; the complainant did register the said vessels and fixed the port of Tacoma as their home port.
    Complainant and defendants further stipulate as to the taxes claimed by the taxing officers for the years 1929, 1930, and 1931.
    Among other citations by the complainant are the following: Title 46, USCA § 11 (42 Stat. 947); Title 46, USCA §§17 and 18 (Rev. Stat. § 4141 and 43 Stat. 947); Title 46, USCA § 45; Ayer & Lord Tie Co. v. Kentucky, 202 U. S. 409, 26 S. Ct. 679, 50 L. Ed. 1082, 6 Ann. Cas. 205; Southern Pacific Co. v. Commonwealth of Kentucky, 222 U. S. 63, 32 S. Ct. 13, 56 L. Ed. 96; St. Louis v. Wiggins Ferry Co., 11 Wall. 423, 20 L. Ed. 192; Morgan v. Parham, 16 Wall. 471, 21 L. Ed. 303; California Shipping Co. v. City So County of San Francisco, 150 Cal. 145, 88 P. 704; Pacific Cold Storage Co. v. Pierce County, 85 Wash. 629, 149 P. 34; Old Dominion Steamship Co. v. Virginia, 198 U. S. 299, 25 S. Ct. 686, 49 L. Ed. 1059, 3 Ann. Cas. 1100; Hays v. Pacific Mail Steamship Co., 17 How. 596, 15 L. Ed. 254; Callender Navigation Co. v. Pomeroy, 61 Or. 343, 122 P. 758, 763; North Western Lumber Co. v. Chehalis, 25 Wash. 95, 64 P. 909, 54 L. R. A. 212, 87 Am. St. Rep. 747; North American Dredging Co. v. Taylor, Treasurer of Chehalis County, 56 Wash. 565, 106 P. 162, 29 L. R, A. (N. S.) 105; United States Whaling Co. v. King County, 96 Wash. 434, 165 P. 70.
    Defendants cite: Article 7, §§ 1, 2, and 3, Constitution of the State of Washington; chapter 130, § 5, Laws of Extraordinary Session, State of Washington for 1925; sections 8 and 17, c. 130, Laws of Extraordinary Session of 1925; United States Whaling Co. v. King County, 96 Wash. 434, 165 P. 70; Northwestern Lumber Co. v. Chehalis County, 25 Wash. 95, 64 P. 909, 54 L. R. A. 212, 87 Am. St. Rep. 747; North American Dredging Co. v. Taylor, 56 Wash. 565, 106 P. 162, 29 L. R. A. (N. S.) 105; Ayer So Lord Tie Co. v. Kentucky, 202 U. S. 409, 26 S. Ct. 679, 50 L. Ed. 1082, 6 Ann. Cas. 205; Yost v. Lake Erie Transportation Co. (C. C. A.) 112 F. 746; United States v. Billings (C. C.) 190 F. 359, 367; Southern Pacific Co. v. Kentucky, 222 U. S. 63, 32 S. Ct. 13, 56 L. Ed. 96; Hays v. Pacific Mail S. S. Co., 17 How. 596, 15 L. Ed. 254; Old Dominion S. S. Co. v. Virginia, 198 U. S. 299, 25 S. Ct. 686, 49 L. Ed. 1059, 3 Ann. Cas. 1100; Gromer v. Standard Dredging Co., 224 U. S. 362, 32 S. Ct. 499, 56 L. Ed. 801; Blodgett v. Silberman, 277 U. S. 1, 48 S. Ct. 410, 72 L. Ed. 749, at page 760; Frick v. Pennsylvania, 268 U. S. 473, 45 S. Ct. 603, 69 L. Ed. 1058, 42 A. L. R. 316.
    Hayden, Langhome & Metzger, of Tacoma, Wash., for complainant.
    Bertil E. Johnson, Pros. Atty., and D. D. Schneider, Asst. Pros. Atty., both of Tacoma, Wash., for defendants.
   CUSHMAN, District Judge.

No question is made as to the propriety of injunctive relief in case the court finds the property in question not subject to the taxes claimed.

Section 17 of chapter 130, Session Laws of the State of Washington, Extraordinary Session of 1925, page 238 (1927 Supplement of Remington’s Compiled Statutes of Washington, Section 11097 — 17), provides: “All vessels of every class which’ are by law required to be registered, licensed or enrolled, must be assessed and the taxes thereon paid only in the county of their actual situs: Provided, that such interest shall be taxed but once. All boats and small craft not required to be registered must be assessed in the county of their actual situs.”

, Defendants contend that while the general rule may be that for purposes of taxation personal property is to be taxed only at the domicile of the owner, that in the present case the ships in question have obtained an actual situs in the waters of the state of Washington, subjecting them to the taxes levied and claimed. With this contention the court is unable to agree. There is nothing disclosed in this case to show that they actually have acquired such situs nor to take this case out of the rule announced in the following: Southern Pacific Co. v. Kentucky, 223 U. S. 63, 32 S. Ct. 13, 56 L. Ed. 96; Ayer & Lord Co. v. Kentucky, 202 U. S. 409, 26 S. Ct. 679, 50 L. Ed. 1082, 6 Ann. Cas. 205; Hays v. Pacific Mail Steamship Co., 17 How. (58 U. S.) 596, 15 L. Ed. 254; Morgan v. Parham, 16 Wall. (83 U. S.) 471, 21 L. Ed. 303; St. Louis v. Ferry Co., 11 Wall. (78 U. S.) 423, 20 L. Ed. 192.

The present case is to be distinguished from Old Dominion Steamship Co. v. Virginia, 198 U. S. 299, 25 S. Ct, 686, 49 L. Ed. 1050, 3 Ann. Cas. 1100. In the latter case the vessels were used upon navigable waters, all within Virginia.

The decisions of the Supreme Court of Washington, cited and relied upon by defendants, are not opposed to the conclusion reached. In North American Dredging Co. v. Taylor, 56 Wash. 565, 106 P. 162, 29 L. R. A. (N. S.) 105, involving taxes upon a steam dredger, the dredger was built and used wholly within the state of Washington.

In North Western Lumber Co. v. Chehalis County, 25 Wash. 95, 64 P. 909, 54 L. R. A. 212, 87 Am. St. Rep. 747, the tugs taxed had been engaged in plying wholly within the waters of the state. In the course of the opinion in that ease the court said, at page 103 of 25 Wash., 64 P. 909; 911: “'The evidence discloses that for from four to seven years the three tugs have been at Hoquiam, in Chehalis county; that their business has been towing in the waters of Gray’s and Willapa harbors in this state. * * * ”

In United States Whaling Co. v. King County, 96 Wash. 434, page 438, 165 P. 70, 71, concerning the whaling vessels taxed, the court said: “But the vessels are not common carriers in any sense of the term. They are fishing vessels, nothing more. They have but one home port. From this port they are fitted out and equipped for the only voyages in which they engage, and to it they return when the purpose's of the voyages are accomplished. The business in which they are engaged occupies them less than half the year, and for the remainder of the year they are moored at their home port, where they receive the benefits and protection of the laws of the state. Clearly, it seems to us, if tangible personal property in the form of seagoing vessels can ever acquire a situs apart from the domicile of its owner, these vessels have acquired such a situs. This being so, they are subject to taxation at the place of the acquired situs.”

No contention is made that the vessels would be subject to a tax both in Nevada and Washington. In Farmers’ Loan Co. v. Minnesota, 280 U. S. 204, at page 212, 50 S. Ct. 98, 100, 74 L. Ed. 371, 65 A. L. R. 1000, the court said: “We have determined that in general intangibles may be properly taxed at the domicile of their owner, and we can find no sufficient reason for saying that they are not entitled to enjoy an immunity against taxation at more than one place similar to that accorded to tangibles.”

The decree will be for the complainant, to be settled upon notice.

The clerk will notify the attorneys for the parties of this decision.