author: WILBUR, Circuit Judge.

text:
    KASSER EGG PROCESS CO. v. POULTRY PRODUCERS OF CENTRAL CALIFORNIA.
    No. 6304.
    Circuit Court of Appeals, Ninth Circuit.
    May 8, 1931.

      Chas. M. Fryer and Alfred C. Aurich, both of San Francisco, Cal., for appellant.
    John H. Miller, A. W. Boyken, and Milton D. Sapiro, all of San Francisco, Cal., for appellee.
    Before RUDKIN, WILBUR, and SAW-TELLE, Circuit Judges.
   WILBUR, Circuit Judge.

Appellant brought this action for infringement of two patents issued to Samuel F. Henderson, No. 1,174,008, issued February 29, 1916, for the art of preserving eggs by the application of a colorless, odorless, tasteless, nonvolatile mineral oil to the shell of the egg, and patent No. 1,177,105, issued to him for the art of preserving and sterilizing eggs. Appellant states: “Both patents relate to and cover methods for preserving eggs by treating them with petrolatum. In addition, the first patent also covers, as a new product or .article of manufacture, an egg treated according to the methods covered by said patents.”

We quote as briefly as may be from the specifications and claims of the first patent involved in this action:.

“The invention may be-stated as comprehending primarily the application of an odorless, colorless and tasteless substance, in the form of a liquid, to the shéll of an egg, as distinguished from a substance which leaves an objectionable coating on the shell.
“The invention also comprehends the application of a substance to the shell of an egg which is characterized qs having the quality of rapid penetration of the shell of the egg, with a view of preventing the ingress or passage of moisture to or from the egg and also for preventing the passage of destructive bacteria into the eggs through the shell.
“A freshly laid egg has a coating of gelatinous substance, which is commonly known as ‘bloom.’ It is recognized that this substance has a preserving tendency, but is soon dissipated or destroyed when exposed to the atmosphere. The present invention includes also adding to the egg shell a substance which will, in many respects, resemble both in effect and in appearance the aforementioned natural bloom.
“The material with which I treat the eggs and which I have discovered can be used with great success for the purposes above stated, is what is known as ‘liquid petrolatum.’ This substance or material is, according to my best and present information, a mixture of hydrocarbons, chiefly of the methane group, obtained by distilling off the larger part of the lighter and more volatile portions of petroleum, the residue being purified so that the remaining substance is substantially colorless, oily, transparent, without odor or taste, and does not congeal or form a paste or waxy coating when applied or exposed. * * *
“It may be noted also that the material liquid petrolatum, ‘petroleum liquidum’, possesses the characteristics of being uninjurious to the human system, and being an oil, is moisture repellant.
“Eggs treated with liquid petrolatum, either at a normal temperature or at a highly heated temperature possess general characteristics which will preserve the egg and render the shell moisture repellent and germ proof. It does not impair the egg in any material respect, the moisture of the contents of the egg being prevented from escaping through the oil treated shell. * * *
“The material ‘liquid petrolatum’ or its equivalent I have found represents a very satisfactory and successful artificial bloom, the natural bloom being recognized as an important preservative for the egg for a very short duration of time. In this particular it may also be observed that the material being of an oily character gives a ‘bloomy1 appearance to the shell so that the egg has the ap’pearance of freshly laid and this is "maintained until the egg is used. * * *
“While I have found liquid petrolatum is very successful for the purposes specified, I wish it understood that other light oils, if possessing the same oí general characteristics of liquid petrolatum, may be employed without departing from the invention, and I do not wish my patent protection to be limited to the specific material. I believe, however, I am the first .to ever discover that by treating an egg with a substance having the characteristic above outlined, a very beneficial and useful result is obtained and therefore I do not wish to be limited to the specific material.
“Having thus described the invention, what is claimed is:
“1. The method of preserving eggs consisting in treating the shells thereof with a substance consisting of a mixture of hydrocarbons, chiefly of the methane series, obtained by distilling off most of the lighter and more volatile portions from petroleum, purifying the residue so that the remaining substance is substantially colorless, oily, transparent, is without odor or taste, and not readily evaporable.
“2. The method of preserving eggs consisting in treating the entire shell thereof with liquid petrolatum.
“3. The method of treating eggs consisting in subjecting the eggs to a bath of liquid petrolatum, removing the eggs from the bath and permitting the surplus to flow from the shell.
“4. The method of preserving eggs consisting in treating the shell thereof with a substance having substantially the characteristics of liquid petrolatum.
“5. The method of treating eggs for preserving purposes consisting in applying to the shell of the egg throughout, a substantially colorless, tasteless, transparent, nonvolatile mineral oil.
“6. An egg having its shell treated with liquid petrolatum.
“7. An egg having its shell treated with an oil which possesses substantially the characteristics of liquid petrolatum.
“8. An egg having its shell treated with a hydro-carbon oil which possesses the characteristics of liquid petrolatum.
“9. A method of preserving eggs consisting in coating the shell thereof with liquid petrolatum.
“10. The method of producing an artificial bloom for egg shells consisting in applying to the shell liquid petrolatum.”

The second patent (No. 1,177,105) is for an improvement on the first, by applying the oil when heated. The specifications of the second patent largely duplicate the first with certain additions, a portion of which we quote as follows:

“In carrying out the method, the eggs in quantities if desirable, may be placed in a wire basket or other reticulated carrier, immersed in a bath 'of liquid petrolatum. Conveniently the liquid may be heated to a temperature from. 210 to 225 degrees, more or less, with a view of destroying by the heat the living destructive bacteria, while at the same time applying the preservative to the shell. The eggs are allowed to stand in the bath'for a short period of time, which will differ according to the temperature of the liquid. Under the above high temperatures it has been ascertained that five seconds is ample time. A longer period by a few seconds may be required for treating the eggs at a lower temperature of the liquid. The eggs are removed from the bath after treatment and placed on any convenient form of drain table and the surplus liquid permitted to pass from the shell. In this condition the eggs are ready for storage or the market. * * *
“Having thus described the invention, what I claim and desire to secure by Letters Patent is:
“1. The method of preserving eggs consisting in dipping the eggs into a heated liquid oil substantially odorless, substantially colorless, non-volatile and non-drying.
“2. The method of preserving eggs consisting in introducing the egg into a body of heated liquid petrolatum.”

The trial court held both these patents void for want of invention. As the record is somewhat voluminous, consisting of 456 pages of briefs, transcripts, and exhibits, we can perhaps best state appellant’s position in this appeal by quoting from its brief as follows:

“Henderson filed the application for his first patent on August 28, 1915. At that time he realized that efforts had been made to discover a satisfactory way to preserve eggs. - ■
“In his specification he states:
“ ‘It has been appreciated heretofore that were it possible to so treat a fresh egg that it could be preserved in its natural condition substantially with a maintained natural color, taste and bulk, it would be a highly desirable and important discovery. I believe I have discovered a method and material for effecting this desirable result in a satisfactory manner.’
“He then goes on to point out the various objections which had come to his notice in connection with the prior efforts to preserve eggs. In this connection, he states:
“ ‘Some of the materials and methods employed affect the taste of the eggs, discolor the shell, leave objectionable deposits on the shells, and in other particulars have been found to be unsatisfactory.’ .
“Again he points out that the material to be employed must not ‘congeal or form a paste or waxy coating when applied or exposed.’ For this reason he says that.it is not practical- to use a ‘waxy material, such as paraffin.’ He also states that ‘paraffin oil’ is unsuited to the accomplishment of his object.
“The patentee then goes on to say that he has discovered that a liquid hydro-carbon, having certain characteristics, if applied to the shell of an egg, will accomplish the result sought and solve the problem which pri- or efforts had failed to solve. In identifying this particular hydro-carbon, he was careful not merely to call it by name. He was evidently aware of the fact that in the then development of the petroleum industry the mere name of a hydro-carbon was an unsafe criterion by which to identify such product. He, therefore, very carefully, in his specification and in his claims, pointed out that the hydro-carbon in question was one which was substantially colorless, oily, transparent, without odor or taste, and not readily vola-tilizable. The absence of color, odor and taste was essential in order to preserve the characteristics of the egg necessary to its edibility. The oily, non-volatile properties were essential to provide á protection for the egg, which would not dry or become sticky or gummy, or deposit a coating, but would retain its original condition for a long period of time. In other words, his process not only had to leave the eggs unaffected as far as characteristics essential to edibility were concerned, but moreover had to preserve, as nearly as possible, the natural appearance of ‘bloom’ of the egg in order to increase its salability and market value.
“In his specification, the patentee stated that the particular hydro-carbon which he had discovered, would overcome the long unsolved problem, was named ‘liquid petrolatum,’ but he promptly proceeded to enumerate and particularly point out the above properties of this material in order not to leave any uncertainty as to the characteristics which he had discovered were essential. The patentee further states that in applying the oil to the egg, the temperature may be raised to advantage. This additional idea or step of the invention, although disclosed in Henderson’s application filed August 28, 1915, was not claimed by him in that application. . He preferred to claim this specific aspect of his invention in a co-pending application filed by him January 21, 1916, over a month prior to the issuance of the patent on his first application. It was upon this co-pending application that the second patent in suit, No. 1,177,105, was issued, and it is quite similar to the application and specification of the first patent. The only difference is that in the second patent the elaims are directed to the use of heated, odorless, colorless, non-volatile, non-drying mineral oil, or petrolatum, whereas the use of heat is not included in the claims of the first patent. This was fully authorized under the law: It was optional with Henderson to include in either of his two co-pending applications the claims specifying the use of heat.
“An examination of the prior art to be considered later, shows that Henderson was the first to discover and apply certain fundamental propositions which made his invén-tiohs a real advance in the art and made them successful, practical contributions to the sum of human knowledge, where all prior efforts along the same lines had failed. Not one of the patentees of the prior art, all of whom we must presume, under the law, were more than merely skilled in their art, and were in fact persons possessing the best inventive genius, was capable of making or did make the discovery which Henderson made. Not one of them had the flash of genius which enabled Henderson to. teach to the world that the desired object could be accomplished merely by the, application to the egg of a single, simple, colorless and tasteless substance, without the employment of any other steps or ingredients.
“Each and all of the inventors in the pri- or art deemed it essential to their respective attempts to solve the problem, to include something more than this. Most of them tried to accomplish the desired result by using compounds of numerous and various ingredients. Many of them resorted to chemical reactions. Some found it essential to employ a vacuum. One even went to the ludicrous extent of insisting that the problem could only be solved by treating the egg almost in the process of being laid, so that a preservative could be applied while the egg retained its original animal heat and other newly laid conditions. Further, every one of these prior inventors employed one substance or another which was destructive to the objects sought to be accomplished, and left the egg with either an odor, color or taste, or an undesirable layer of material on the shell. In fine, not one of them was able to discover, and not one of them taught that there was a substance which, in and of itself, without admixture with other substances and without the use of steps other than mere application to the egg, would have the desired preservar tive effect and yet leave the egg with practically its original, natural appearance or bloom, and without odor, color or taste.
“In other words, it is evident from the art referred to that Henderson was the first to discover and employ a substance capable of preserving eggs and which alone, and without other admixture, has each and all of the requisite characteristics, to-wit, absence of color, absence of taste, absence of smell, and which was non-volatile and non-drying so as to remain effective on the shell of the egg for a considerable period of time and yet leave thereon no coating which in any way affects its appearance. Likewise, he was the first in the art to utilize such a material with the aid of heat, as disclosed and claimed in his second patent. And, needless to say, he was the first to produce as a new article of manufacture an egg treated by this method. His inventions, therefore, are not only novel over the art in material respects but are the result of the exercise of an inventive genius which reduced unsuccessful complexity to successful simplicity, and, therefore, are inventions of the highest order.
“ ‘To obtain absolute simplicity is the highest trait of genius.’ Dececo Co. v. Gilchrist (C. C. A.) 125 F. 293, 298.
“ ‘The derrick of the patent is singularly simple. It is excelled in that regard by no other derrick shown in the testimony. Its simplicity is its chief claim to excellence, though it was its undoing in the court below.’ Neill v. Kinney (C. C. A.) 239 F. 309, 313.
“This fact is amply borne out by the history of the patents which Henderson obtained for such inventions.
“It is not necessary, in order to verify the above statements, to go further back in the history of the patents than their acquisition by the present claimant. Such acquisition was possible only upon the payment of twenty-five thousand ($25,000) dollars, a price most eloquent of the value and importance of said patents. Since the acquisition of said patents by plaintiff a large number of concerns have processed eggs as licensees under such patents. As indicated by Plaintiff’s Exhibit 13, over one hundred and sixty such licensees have employed the inventions of the Henderson patents commencing with the year 1925 to date, and during said period have processed over three and a half million cases, each containing thirty dozens of eggs.”

On the other hand, the position of the appellee is tersely stated in its brief as follows:

“The patents in suit are extremely simple. They relate to the preservation of eggs by treating such eggs with oil. Eggs dipped in oil have been known for over a century. Various lands of mineral and vegetable oils were used.
“The patentee, Henderson, did not invent ‘liquid petrolatum’ or any other oil; he did not, invent the method of preserving eggs by using oil; nor did he invent a machine. At most, he merely selected and substituted a more highly refined mineral oil for the oils previously used. The method of treating eggs remained the same and the result was the same.
“Under well established rules of patent law the patents are invalid for want of invention and also because of anticipation. Judge St. Sure, in a carefully considered opinion, so found, and it is submitted that the evidence fully supports such conclusion.”

In considering the state of the art of preserving an egg by closing the pores of its shell, attention is called to an article published by Benjamin Eranklin concerning the preparations necessary or advisable by a passenger for a long sea voyage. He says, “You ought also to carry with you *' * eggs dipped in oil. * * *” Appellee finds in this suggestion, published in Erank-lin’s writings and now accessible in public libraries, a complete anticipation of the art claimed to have been invented by Henderson. Appellee’s position on that matter can best be stated by quoting from its brief, as follows:

“Over a hundred years ago this problem was solved. Before the year 1790 it was known that oil was a suitable medium for closing the pores of an egg for purposes of preservation. Benjamin Eranklin, the American patriot, in a published work, recommended that eggs be preserved by dipping them in oil. Prom that time to the present time eggs have been kept fresh by treating them with oil. The oil clogs up the shell pores and the egg will be preserved. Eggs are so treated in the season of greatest productivity and are stored until such time as they become scarce and expensive.
“It is apparent that many different varieties of oil could be used in this process. That used by Eranklin was the oil then available on the market. In later years, when the art of refining oil developed, many new and purer oils unknown in Franklin’s time were being marketed. That eggs could be preserved by treating them with oil was common knowledge. Those desiring to keep eggs by this method only had to select the best oil available for the purpose, at the time such eggs were to be treated. The substitution of one kind of oil for another did not change the process. It remained the same. Oil still was used as the medium for closing the pores of the egg shell.”

Appellant’s brief would, however, indicate that Franklin’s advice to dip eggs in oil was entirely too vague to indicate what was proposed to be done or the results it was hoped to achieve thereby or the actual result attained by the process. Appellant states in that regard, as follows:

“At the trial the defendant placed great stress on this exhibit as showing the same method of processing eggs as is disclosed in the Henderson patents in suit and Judge St. Sure relied upon it as the néxt -premise upon which his conclusions were based. This exhibit discloses an article by Benjamin Franklin, entitled ‘Precautions to be. used by those who are about to undertake a sea voyage,’ in. which he lists the provisions suggested for a long sea journey. Included among the provisions which he suggests appear the words ‘eggs dipped in oil.’ Nothing is stated as to the purpose for which the eggs were to be dipped in oil; nothing is remarked as to the preservation of eggs when dipped in oil; nothing is said as to the quality or kind of oil to be used and the character of eggs to be so dipped in oil is left to conjecture. Did the eggs become rancid after being so dipped? Were they edible? Did they have an odor or color or taste? These and countless other questions remain unanswered and undisclosed by this exhibit. The publication therefore leaves these essential facts as to the character of the disclosure entirely to surmise and conjecture. Such a disclosure is clearly insufficient to affect the validity of any patent.
“ ‘The patent law requires certainty of expression, and not merely conjectural allusion or ambiguous reference to the subject-matter, before a prior patent can overcome the validity of a later one that has meritoriously progressed the art.’ A. B. Dick Co. v. Underwood Typewriter Co. (D. C.) 246 F. 309, 312, affirmed (C. C. A. 2) 252 F. 990.
“And this meaningless exhibit is practically the foundation of the trial court’s decision that the patents in suit are void for want of invention! As we will hereafter show, the burden of proving lack of invention is on the defendant, and this defense must be established beyond a reasonable doubt. Franklin’s nursings although pleasant reading certainly far from accomplish this purpose.
“Can it be said that said exhibit meets .the test of what a prior publication must contain in order to defeat a subsequent patent as laid down in this circuit in the ease of Consolidated Contract Co. v. Hassam Paving Co., 227 F. 436, wherein Judge Morrow said, commencing on page 441:
“ ‘The rule is that a description-in a pri- or publication, in order to defeat a patent, must contain and exhibit a substantial representation of the patented improvement in such full, clear, and exact terms as to enable any person, skilled in the art or science to which it appertains, to make, construct, and practice the invention patented. It must be an account of a complete and operative invention, capable of being put into practical operation.’ ”

These, deficiencies, however, if they be such, were supplied to some extent at least by subsequent disclosures contained in patents issued by this and other governments which we will now consider.

In 1869 letters patent were issued by the United States Patent Office to John Long-maid of New York City. This invention of a process for preserving eggs specified the removal of air from the egg by placing the egg in a partial vacuum and then surrounding the egg with carbonic acid gas, which ■would be absorbed through the shell. The portion of the specifications of interest in this proceeding is the specification that, after the exchange of the air for the carbonic acid gas in the egg, the pores of the egg were to be closed by the application of oleaginous or mucilaginous substances., We quote from the patent as follows:

“This invention relates to a new and useful improvement in preserving eggs for market and use, and consists in the process hereinafter described, whereby eggs may be preserved, fresh and fit for use, for an indefinite period of time. * * *
“The eggs may now be taken from the vessel and covered (by immersion or otherwise) with any suitable material for filling the pores of the shell.' Oleaginous or mucilaginous substances are suitable for this purpose, or lime water may be used with good results. * * •
“Instead of injecting carbonic acid gas after the air has been extracted from the air cells in the eggs, I may inject either of the above mentioned substances for filling the pores of the shell, but I prefer to fill the air cells with the carbonic gas, as it renders the process more complete.
“The substance for filling the shell pores may be injected before the eggs are taken from the vessel, or immediately after the introduction of the carbonic acid gas, if desired, the vessel being slightly agitated, to insure the perfect covering of each egg with the liquid.”
Ferdinand Cassel of Cologne, Prussia, was issued a patent from the United States Patent Office dated August, 1870. This patent provided for the preservation of meat and other articles of food by coating them with oil obtained from grape seeds. The patent disclosed the method of producing the oil from grape seeds by expressing the oil or by extracting it chemically. He says: “By expressing, the oil is obtained directly, and very little colored, but this method does not give much oil. ® * * By the other mode of extraction, nearly all the oil existing in the corns is obtained, but the oil is very darkly colored; nevertheless it is clear, and free of all slime.”
He stated that eggs “may be similarly preserved by coating t^em with oil obtained from the corns of grapes.” The claim of the patent is as follows: “The improved method of preserving an article of food by coating it with the oil obtained from the corns1 of grapes, substantially as before set forth.”
In 1872 a French patent, Ho. 94,226, was issued to Grinet and Caudrelier for a method of water proofing and preservation of organic materials “by means of some hydrocarbon mixed in certain proportions with paraffine employed at a temperature of heating of 50 degrees (90° F.), we obtain a water-proofing and a complete preservation.”
In 1875 the United States Patent Office issued a patent to Frank D. Stone and Wor-thington Murray for an improvement in an apparatus for preserving eggs. The signifi--canee of this invention so far as the case at bar is concerned is solely because of the fact that it assumes that the method of preserving eggs by coating them with paraffin wax or any other melted substance was well known. The specifications state: “Our invention relates to improved machinery for use in preparing eggs to preserve them; and consists in a receptacle for holding paraffine or other, coating compound surrounded by a steam or hot-air jacket and a separate airtight receptacle situated over the same for holding the eggs to be treated.”
In 1882 the British government issued a patent to Henry Harrison Doty of a somewhat'similar nature.’ This patent provides for the covering of eggs “with such substance as paraffine or other substance intended to close the pores of the egg shell and exclude the air * * * the eggs being placed in frames or cage are lowered into the cylinder, the substance in the lower half in paraffine having been previously melted the cover is adjusted onto the Indian rubber ring or packing; then communication is made with the vacuum engine and when the desired exhaustion has arrived the rod with the frames or cage is lowered into the now liquid par-affine. * * *”

In 1883 provisional specifications for a patent were filed with the British Patent Office by James Yate Johnson for method of preserving food. The specifications provide: “This invention relating to the preservation of food and other animal and vegetable substances consists in the utilization as hereinafter described of the antiseptic properties possessed by certain paraffins or hydrocarbons variously known as ‘Petreoline’ vase-line or soft paraffin.”

This patent describes in detail the method of manufacturing the “petreoline” and describes its qualities as follows:

“The ‘Petreoline’ thus obtained is white or red in various shades and appears as a homogeneous mucilaginous paste somewhat tenacious, very unctuous and yielding readily to pressure but never showing any exudation of oil and is inodorous and tasteless.
“Melting at about 35 degrees Centigrade it boils at 300. Its density at 50 degrees Centigrade is 0.840. It is desirable to protect it from the solar rays as a prolonged exposure to the light develops a slight odour of petroleum. ‘Petreoline’ dissolves in various proportions in fatty substances, essences sulphuret of carbon and chloroform and ether. In the latter case the solution is more readily effected at an elevated temperature. * * * Damp air, salts and oxides are without effect upon ‘petreoline,’ which is incapable of turning rancid or of saponification, being a natural mixture of liquid and solid hydrocarbons in the proportion of about 74 parts by weight of liquid hydrocarbon to 26 parts of solid hydrocarbon.”

The patent was issued March 25, 1884. In addition to the description of petreolhse ■ contained in the preliminary specification, we have this further description: “The ‘petreo-line’ thus obtained is white or red in various shades and appears as a homogeneous mucilaginous paste somewhat tenacious, very unctuous and yielding readily to pressure but never showing any exudation of oil and is inodorous and tasteless.”

It was evidently the opinion of the pat-entee that this invention could be used for the preservation of eggs. In that regard he says: “Aeording to this invention meat, fish, fruit, vegetables, eggs, custards, oils, fats and in general all organic matter of animal or vegetable origin are preserved from deterioration or decay by the application of this substance as hereinafter described.”

Marvin L. Chappell, a chemist, expert in dealing with petroleum products, testified with relation to this patent that the product “petreoline” described in the patent is a mineral oil, odorless, tasteless, and nonvolatile at all temperatures, that it would be a liquid oil at normal temperature. The witness says the percentage of oil and low percentage, of solids “would necessarily mean it would be a liquid and that the food to be preserved, such as eggs, could be dipped into it readily.”

In 1900, the German Patent Office issued a patent to E. Utescher for the preservation of eggs. In this patent it is stated:

“It is known that eggs can be preserved by first coating them with vaseline and keeping the coated eggs in lime solution. * * * The process of coating the eggs with such a coating of vaseline and then immersing them in a preserving solution is on the one hand inconvenient. * * *
“In contrast to this known process the foregoing process consists therein that the egg shells before the eggs are placed in the preserving fluid are moistened with paraffine oil to such an extent that the access of the preserving liquid to the pores is not completely prevented but on the contrary the penetration of the preserving liquid to the inside of the eggs is diminished and the ‘necessity for the purification of the egg shells before thé use of the eggs is avoided. * * *
“The eggs which if need he are first candled so as to separate the good eggs from any bad ones that may be present are then brushed with a small brush which has been soaked in a little paraffine oil. This may also be done in such a way that a glove soaked in paraffine oil is drawn over the right hand and the eggs wiped. The layer of fat which in this way gets on the egg shells is hardly noticeable. * * *
“* * * It is only necessary for the paraffine oil mixture to be easily distributed in a very thin layer. * * *
“The comparative tests which have been carried out with the same eggs without the slight impregnation of the egg shells with paraffine oil, on the other hand by the use of this process, were very much in favor of the foregoing process. * * *
“Process for preserving eggs, distinguished thereby that the egg shells before being placed in the preserving liquid are moistened with paraffine oil.”

In 1901 Dr. Teisler, of Germany, procured a patent for the preservation of eggs. This patent is of interest in the ease at bar solely because it assumes as a well-known fact that the cause of spoilage in eggs is the penetration of the shell by bacteria, and that the preferred method of preventing such action is by stopping the pores of the shell with various substances, among others mentioned being grease or vaseline. We quote from the patent as follows:

“A good egg preservative must therefore be in a position firstly to kill the bacteria already existing on and in the egg shell, and secondly to prevent the entrance of further bacteria into the egg. The latter can be only effected by the nunierous pores of the egg shell being stopped up. Eggs preserved in a suitable manner should, of course, suffer neither in smell, taste nor appearance.
“Lime water, salicylic acid, copperas, water glass and grease are the substances most usually employed for preserving eggs. None of these substances, however, completely comply with the requirements necessary for an egg preservative, although some of these substances in practice have a reputation for good results. Very curiously greater preference is not given to the substances which are characterized by their bacteriaeide qualities, such as salicylic acid, but rather to those about the bacteriaeide action of which little is known and which only act by stopping the pores, such substances for instance as water glass, grease or vaseline.”

In 1903 the United States Patent Office issued‘a patent for the preservation of eggs by the application of a composition composed principally of lard, petroleum jelly, paraffin, and beeswax, with small quantities of formaldehyde and oil of eitronella.

In 1905 a British patent was issued to Pauli and Mach. This patent had largely to do with the cleaning of the egg before the pores .of the egg shell were filled “with par-affine or the like.” One of the claims of this patent is as follows: “Eggs having the pores in the shell filled with some substance affording no food for bacteria (such as paraffine, wax or the like), the impregnating material covering also the inner surface of the shell in a homogeneous thin layer.”

June 14, 1904, the United States Patent Office issued a patent to W. H. Strickler. The invention claimed for this patent was one for the immersion of the egg in paraffin oil while the egg still retains the animal heat from the body of the hen. The proposed scheme of the inventor was to have the hen lay the egg in a nest immediately over an oil bath into which the egg would drop as soon as laid. In short, the scheme was one to have the hen apply the preservative.. The patent assumes as a well-known fact that the immersion of an egg in paraffin oil would tend to close the pores and thus preserve the egg. It will be observed in considering the portions of the patent which we shall presently quote that it was essential to the efficacy thereof that the bath into which the egg was dropped should be liquid at ordinary atmospheric temperature.

“In practicing my process I provide means for rendering impervious to air the shell of the egg while it still retains the animal heat of the fowl and while its contents are still expanded, whereby when the egg subsequently cools and the contents thereof contract, air does not pass through the shell to the interior thereof, such as occurs upon the natural cooling of an unprotected egg. I employ for the air-excluding medium any suitable substance by which the exterior of the egg shell may be invested, the medium being preferably applied to the shell in a liquid state and of such nature that upon the cooling of the egg the external air-pressure forces the substance into the pores of the egg shell, whereby the shell becomes impervious to the air and excludes its entrance to the interior thereof. Paraffine oil possesses the desired air-exeluding qualities when applied in the manner hereinbefore mentioned, and I have used this substance with a high degree of success. Said air-excluding medium should be applied to the egg before the latter has lost any appreciable amount of its temperature in order to secure the best results and to this end should be applied to the egg shell as soon as practicable after the egg is laid.”

In 1908 a French patent was issued upon a method of preserving products, including eggs, by immersing them in melted paraffin. In the patent it is stated: “It is evident that one might replace the paraffine by a substance or a compound of analogous substances such as yellow or white wax, sperma-ceti, Judea pitch, etc., provided that the material used is without odor or taste and in no way attacks the organoleptic qualities of the foods and forms a coating impermeable to air.”

In 1909 a French patent was issued to Etard and Lambert for the preservation of teggs. The patent discusses the previous state of the art of preserving eggs, and, among other things, contains the following: “The methods of preservation consist in coating the shell of the eggs with an odorless varnish such as oil, paraffine, etc., or in placing the eggs in lime, straw, sawdust, bran, ashes, etc., will prevent the air from penetrating through the holes in the shell but will not destroy the spores and the myceliums which continue to develop in spite of the outer protective envelope.”

The purpose of his invention was to overcome 'the objections to the known methods of preserving eggs. This process, in short, consisted- in immersing the egg first in a “liquid of a harmless nature brought to a high temperature * * * this liquid being capable of dosing up, after the immersion, the orifices of penetration presented by the shell. * * ’* This liquid must not give any taste to the eggs and must be capable of stopping up the holes of the shell after their immersion.

“It is possible to employ, to obtain this result, an antiseptic solution of suitable nature, grease, edible oil or neutral oil, par-affine,” etc.

The significant thing about this patent, from the standpoint of present inquiry, is the fact that the author of the invention requires a liquid such as a neutral oil or paraffin which is tasteless, and, as the patentee recognized, should be odorless.

In 1911 a United States patent was issued to Peterson and Clairemont for an egg-preserving compound in which the egg was to be dipped. The liquid was a compound composed of one-third juice of cactus and two-thirds cotton-seed oil.

In connection with these various patents defendant introduced evidence, the purpose of which was to show that the petrolatum specified in the Henderson patents was nothing more nor less than the paraffin oil mentioned. in a number of the foregoing patents. In order to establish this fact, the United States Pharmacopoeia, authorized by the United States Pharmacopoeia Convention held in Washington May 11, 1922, was offered in evidence wherein liquid paraffin, white mineral oil, paraffin oil, and liquid petrolatum were described and treated as synonymous. The articles described it as “colorless, transparent, oily liquid, free, or nearly free, from fluorescence.”

The United States Pharmacopoeia authorized by the convention held May 10, 1910, also treats liquid petrolatum and liquid paraffin as synonymous, and describes it as follows :

“A colorless, transparent, oily liquid, free or nearly free, from fluorescence, odorless and tasteless when cold, and possessing not more than a faint petroleum odor when heated.
“When cooled to 10° C., liquid petrolatum does not become more than opalescent (solid paraffine).”

In 1914 the United States Dispensary, based upon the ninth convention of the United States Pharmacopoeia (1910) and the British Pharmacopoeia (1914), describes the characteristics and methods of manufacture of petrolatum, and states that this article has been marketed under many names, including liquid paraffin, liquid vaseline, nutraloil, paraffin oil, Russian mineral oil, Russian paraffin oil, white paraffin oil. The appellant claims that, although these publications show that paraffin oil and petrolatum were synonymous terms at the time they were issued, they do not prove that by the term “paraffine oil” used in some of the patents the patentee intended to designate “petrolatum,” for the reason that this product is of comparatively recent manufacture, and was therefore unknown at the time of the foregoing patents. It appears that the product was first used in this country under the name of Russian oil, but that after the World War began the supply of Russian oil was shut off, and our own refineries produced a product which is marketed under the various names hereinbe-fore mentioned. From an inspection of the foregoing patents, it is clear that each pat-entee had in mind an odorless and tasteless oil to be applied to the egg shell. It is clear that an oil that did not deteriorate and become rancid and one that' was colorless, and therefore did not change the appearance of the egg, was desirable. Liquid paraffin was used for this purpose. It is probably true that the paraffin referred to in most of these patents as an oil had been reduced to liquid form by increasing its temperature above its melting point. When so melted, it had all the attributes of petrolatum, with the single exception that it had a higher melting point, that is to say, liquid or molten paraffin had the exact qualities described in the Henderson patent, in that it was odorless, colorless, nonvolatile mineral oil. Henderson, in his specifications, recognizes the prior use of paraffin oil for the purposes of preserving eggs, and in that regard he differentiates his patent as follows:

“With this material I believe, and as far as I now know from experiments and extensive tests, the pores of the shell are not entirely or completely closed, as would be the ease with a waxy material, such as paraffin or paraffin oil. This I believe is important from a scientific standpoint inasmuch as by the partial sealing of the pores, objectionable or destructive bacteria are prevented from entering through the pores, while the molecules of oxygen and ozone are permitted to enter through the shell.”

The idea of using an oil or grease, however, as appears from the foregoing quotations from patents, is not new in the art of preservation of eggs. At most, the specifications of Henderson’s patents indicate that the use of paraffin had the disadvantage that it was not an oil at ordinary temperature.

While the use of paraffin with its higher point of liquidizing was pointed out as objectionable by the patentee, it should be observed that various patents above mentioned specified liquid vaseline; that is, vaseline melted by the application of more heat than average atmospheric temperature.

We think there was no invention involved in the selection of an odorless, tasteless, colorless, nonvolatile mineral oil as a suitable oil in which to dip an egg for human consumption. If, however, we assume, as appellant contends, that there was some inventive genius shown in the selection of an oil for that purpose which has recently been placed on the market which had all the characteristics of the familiar oil, melted paraffin, except a lower melting point, then we are faced with the faet that as early as 1883 Johnson, in the specifications of his patent for the preservation of food, recognized the desirability of using hydrocarbon derivatives from petroleum for the purpose of preserving food; that he described the method of manufacture of such a derivative which he named “Petroline,” which was white; odorless, and tasteless, and nonvolatile, and eomr posed of hydrocarbons, and having a density of 50° C. (90° F.) of .84 and a melting point at 35° C. (67° F.), and was therefore an oil at usual atmospheric temperature. It is probable . that the product, petroline, de- ■ scribed by Johnson in his British patent of 1883, is not substantially different except in' degree of refinement from the petrolatum described in appellant’s patent, although it has a somewhat higher melting point. In view of all this evidence, the learned trial judge stated that:

“All that patentee Henderson did was to select and substitute a more highly purified mineral oil for the oil previously used in a well-known process for preserving eggs.
“I am therefore of the opinion that both of the patents sued upon are void for want of invention.”

With this view we fully concur.

Judgment affirmed.

SAWTELLE, Circuit Judge, concurs.


source: Caselaw Access Project

license: Public Domain

text:
    LEVERING v. INDEMNITY INS. CO. OF NORTH AMERICA et al.
    No. 6199.
    Circuit Court of Appeals, Ninth Circuit.
    May 8, 1931.
    Rehearing Denied June 15, 1931.
    Bicksler, Smith, Parke & Catlin, H. E. Booth, and Martin M. Levering, all of Los Angeles, Cal. (Henry Trowbridge, of Los Angeles, Cal., on the brief), for appellant.
    Hartley F. Peart, of San Francisco, Cal., and Gallaher & Ozias, of Fresno, Cal., for appellee Indemnity Ins. Co. of North America.
    Everts, Ewing, Wild & Everts, of Fresno, Cal., for appellees Vogel and others.
    Young & Hudson and Bert F. Rabinowitz, all of San Francisco, Cal., for appellee Cro-well.
    Before RUDKIN, WILBUR, and SAW-TELLE, Circuit Judges.
   WILBUR, Circuit Judge.

This action is brought upon an indemnity bond given January 26,1924, on behalf of the sellers to the purchaser, the appellant, in connection with a sale and as an inducement to the purchase of a majority of the shares (679) of the National Bank of Bakersfield, at $140 per share. Judgment was rendered for the defendants, and the plaintiff appeals. The case was tried by the court without a jury in pursuance of a stipulation in writing, and written findings of fact were made by the court. It appears from the written agreements made at the time of the sale that the primary purpose of the parties was to provide the bank with liquid assets in an amount necessary to satisfy the comptroller in lieu of frozen assets of the bank. These frozen assets already amounted to $133,000 at the time of the sale, and it ufas anticipated might amount to $299,641.88 more, a total of $432,-641.88. The bank capital was divided into 1,000 shares, apparently of $100 each, although that does not clearly appear in the record. The liquid assets were to be furnished in cash to the hank by the appellant, to the extent of the purchase price he agreed to pay therefor, $90,060, if necessary. The purchase price was impounded in escrow for that purpose. The balance when needed was to be paid by the sellers. The latter agreement was guaranteed to the extent of $50,000 by the appellee Indemnity Insurance Company of North America by the surety bonds herein sued upon. The frozen assets and those which subsequently became so were to be the property of the sellers, pro tanto, as soon as cash was supplied to take the place of such assets, although the bank was to retain title and possession thereof for the purpose of collection, the proceeds thereof to be turned over by the bank to the sellers. The defendants, other than the Indemnity Insurance Company, are the sellers. The bank was not a party to those agreements, although it was to be the beneficiary thereof, and was to pay to the sellers a part of the consideration moving to them therefor, that is, the sums realized from the frozen assets, when collected. It was agreed that an assessment of $27 per share to cover a portion of that amount would be paid by the appellant as a part of his purchase priee. The purchase price of $140 per share was agreed to on the express understanding that $299,641.88 of assets were good.

In view of the fact that the value of these assets was somewhat impaired and SO' recognized, stipulations were entered into in the contract, and the bonds herein sued upon were given on January 26,1924, to make good to the purchaser any loss which might be suffered by reáson of the loss or diminution of these assets. The importance of these agreements will be observed when it is noted that the book value of these assets considered good was twice as great as the total value of the stock of the bank, estimated at the contract price of $140 per share, and that assessments aggregating$182 per share were subsequently levied upon this stock as a result of the charging off of these assets, although the contract of purchase and sale was predicated upon the assumption that these obligations are worth their face values. Before the payment of the purchase price by appellant had been completed as ¡had been anticipated, the comptroller had directed that an additional amount of $92,000 should be charged off because of items embraced within the total of $299l,641.-88 of guaranteed but doubtful value. In order that this assessment on the 679 shares should be paid off, a supplemental agreement dated March 10, 1924, was entered into by all parties to this action whereby the vendors of the stock agreed to the application of the $25 per share that had already been paid into escrow by the appellant to discharge this new assessment, and the appellant was to pay and did pay the balance of $42,128. The capital of the bank had thus been augmented by $119 ' per share. The total amount thus paid by the appellant to the bank was sufficient to constitute the entire purchase priee on 553 shares of the stock at $140 per share, and in aeeord- ' anee with this supplemental, agreement this stock was delivered to the appellant as purchaser as having been fully paid for by him. The delivery of the other one hundred twenty-six shares was not made as agreed by the appellees in the original and supplemental agreements because they were not able to secure possession thereof. The effect of this failure is not discussed in the briefs, and for that reason we ignore it in our decision.

After the agreements of January 26,1924, the comptroller directed that $90,000 more of the guaranteed indebtedness of $299,641.88 be charged off the books of the national bank. This was done, and subsequently an assessment of this amount was levied in pursuance of such order. This assessment was paid by the appellant on the 553 shares sold to him, amounting to $49,770', and he sues to recover the amount so paid in accordance with the provisions of the contract and bond by which the appellant was guaranteed against loss due to the charging off of these accounts, less about $553 which had been collected by the bank upon the guaranteed accounts which, under the terms of the agreement, were applicable to diminish the amount the vendors had agreed to pay. Appellant thereupon demanded from his vendors and surety the repayment of the amount of the charge off and of the assessment which he had paid, and upon their failure so to do brought this action. The appellees answered his complaint claiming that they were not acting on their own behalf in making such sale, but were merely trustees for the Valley Bank of Fresno. The-appellee Indemnity Company claimed it had been induced by representations to the contrary in executing the bond. The other ap-pellees, claiming to be acting as trustees or dummies in making the sale to the knowledge of the appellant, also seek thus to escape the consequences of their default. It was also claimed that the app ellant had purchased as a trustee for divers persons unknown to the defendants. Allegations of the charge off and assessment of the $90,000 were denied for lack of information and belief, and it was claimed that the appellant had violated his contract of purchase because the bank had failed to use due diligence in the collection of its frozen assets. Apparently the appel-lees also claim fraud by concealment of the fact of appellant’s trusteeship and also mistake as to the actual contract guaranteed in the effecting of the agreements and bond herein sued upon, although such fraud and mistake are not very clearly alleged and were not established. They also alleged lack of notice. These allegations and others are not very clearly set forth and in the main are statements or allegations as to the legal effect of the contracts entered into. They need not be further considered, however, as the trial court found the law and the facts on all these issues in favor of the appellant. However, upon the trial it developed that appellant had resold 543 shares of the stock purchased by him for the sum of $150 per share. For that reason the trial court concluded that he had not been damaged by the charging off or loss of assets of the bank, and that his payment of the amount of the assessment had been voluntary, and for that reason gave judgment for the defendants. The sole question presented by the appeal is as to the decision of the court upon this point. The facts are not in dispute, and the question presented is thus one of law. This point we-will now consider.

Appellant testified that at the time he made the sale of the stock to his numerous vendees at the price of $150 per share he agreed with his vendees that he would protect them against loss suffered by depreciation of the assets included in the $299,641.88, and that as an inducement to such purchasers to purchase the stock at the price of $150' per share he had shown them the contracts and bond herein sued upon which he had received in connection with his purchase of the s£oek at $140 per share and assured them that they were thereby fully protected against loss due to the depredation of such assets, and that he would guarantee to them that they would be thus fully protected, and in pursuance of such agreement he did promptly pay said assessments upon the stock he had sold. The difficulty, however, is that the written contract between the appellant and his vendees for the purchase and sale of the stock made no reference to the contemporaneous agreement and representations as to the payment of such losses or assessment by which the appellant bound himself to give his vendees the full benefit of the agreements and bond which he had received. The appellee’s theory sustained by the court is that, inasmuch as the agreement between the appellant and his vendees was in writing, appellant could not be held by them to his oral agreement to make good losses they might suffer or the bank might suffer by reason of the charging off of the bank’s assets. Consequently, it is con-tended in complying with his oral agreement with them appellant was merely performing a moral obligation and not a legal one and that he cannot recover on the bond because there has been no legal loss such as was guaranteed by the bond. On the other hand, it is contended by the appellant that the agreement between the appellant and his vendees to pay the amount of the assessments levied against their stock by reason of the freezing of its assets was a collateral agreement not conflicting with the terms of the written agreement for the sale of appellant’s stoek to his purchasers and was therefore enforceable between the parties thereto, consequently, that the payment made in conformity with such collateral agreement was not voluntary, but in compliance with a binding agreement, citing Sav. Bk. of So. Cal. v. Asbury, 117 Cal. 96, 103, 48 P. 1081; 22 C. J. 1145, 1245, 1246, 1253, 1254; Jones on Evidence, vol. 3, § 439; Whittier v. Bank, 161 Cal. 311, 119 P. 92.

Appellant also contends that the rule against varying the terms of a written agreement by evidence of parol stipulations in conflict with a contemporaneous written agrees meant does not apply to actions between third ' parties, citing Mitchell v. McShame Lbr. Co. (C. C. A.) 220 F. 878, 879; Barreda et al. v. Silsbee, 62 U. S. (21 How.) 146, 169, 16 L. Ed. 86; Sigua Iron Co. v. Greene (C. C. A.) 88 F. 207, 217; Budd v. Hughes, 176 Cal. 687, 689, 690, 171 P. 287. This point seems to be well established and is conceded by the appellees, but it is contended that the relationship between the parties to. this suit makes them parties or privies thereto, and consequently the rule applicable to the right of third parties to object to such parol evidence does not apply, citing Williston on Contracts, vol. 2, p. 1252; Current v. Muir, 99 Minn. 1, 108 N. W. 870; Allen v. Ruland, 79 Conn. 405, 65 A. 138, 118 Am. St. Rep. 146, 8 Ann. Cas. 344; Brenner v. Luth, 28 Kan. 581. However that may be, it is clear that the appellant had a right at any time to reduce to writing this oral agreement with his purchasers either by amending the written agreement, or by a supplemental or collateral agreement in writing evidencing the actual agreement made at the time of his sale. The appellees had nothing to do with such a contract; they were not parties or privies to it, and are not in a position to take advantage of a blunder in reducing the contract to writing (Commercial Tr. & Sav. Bk. v. White, 145 La. 54, 81 So. 753, 755), if the appellant repairs the blunder by furnishing proper evidence of the actual agreement. He did so when in compliance with his oral agreement he paid the amount to the bank that he had agreed to pay. The verbal agreement having been fully executed in that regard was binding on both the parties thereto. Estate of McDougald, 146 Cal. 196, 79 P. 875; Dunn v. Price, 112 Cal. 46, 44 P. 354.

We think that the payment by the appellant to the bank in pursuance of his verbal agreement with his vendees so to do furnished evidence of the actual contract between the appellant and his vendees of the stock admissible in this action between the appellant and the defendants, his vendors, and their surety. The liability of the appellees, however, did not depend upon the fact of payment to the bank of an assessment levied to prevent the impairment of its capital, but arose at once upon the requirement by the comptroller that assets in the schedules A. and B. (items making up the total of $299,641.88) be charged off. The agreement of the Indemnity Company and of appellant’s vendors was that they would pay to him the amount thereof upon notice; the purpose being to furnish liquid funds to replace the frozen assets condemned by the comptroller so that the bank could continue as a going concern. Whether there would be an ultimate loss to the appellees would depend upon the collectibility of such assets. The loss to the appellant occurred when he was compelled to pay more on account of his stock than the agreed purchase price.

Judgment reversed.

SAWTELLE, Circuit Judge, concurs.


author: VAN VALKENBURGH, Circuit Judge,

text:
    INTER-SOUTHERN LIFE INS. CO. v. KLABER, Public Administrator.
    No. 9042.
    Circuit Court of Appeals, Eighth Circuit.
    May 1, 1931.
    Spencer F. Harris, of Kansas City, Mo. (Harris & Koontz, of Kansas City, Mo., on the brief), for appellant.
    Charles N. Sadler, of Kansas City, Mo. (William C. Reynolds, of Kansas City, Mo., on the brief), for appellee.
    Before VAN YALKENBURGH and BOOTH, Circuit Judges, and MUNGER, District Judge.
   VAN VALKENBURGH, Circuit Judge,

delivered the opinion of the court.

Thomas B. Willhoit, originally a citizen and resident of Missouri, went to Arkansas in 1920 to engage in a mercantile business. September 1,1922, he took out, in the appellant company, a Kentucky corporation, with its home office at Louisville, in that state, a poliey of life insurance which provided, in ease of death, for the payment to insured of the sum of $2,000, and an additional sum of $2,000 if the death should result, directly and independently of all other causes, from bodily injuries effected solely through external, violent, and accidental means while the insured was sane and sober. September 1, 1926, the insured disposed of his Arkansas store and purchased .one in Springfield, Mo., to which city he moved with his family. He was a resident of Kansas City, Jackson county, Mo., at the time of his death, December 17, 1928. The premiums on his poliey were kept paid when due until September 1, 1927. At that date he paid a small amount in cash and gave his ninety-day note for the balance, which kept his policy alive until December 1, 1927. December 28, 1927, the poliey had lapsed, but was reinstated January 24, 1928. The poliey when issued contained the following clause: “Incontestability: Subject to the conditions contained in this poliey relating to disability or accident benefits, if any, this policy shall be incontestable, except for nonpayment of premiums, when, after one year from its date, or the date of any reinstatement thereof, the next annual premium has been fully paid in cash. A reduced amount, however, will be payable in ease of death, during or in consequence of military or naval service in time of war without a permit, or in ease of self-destruction, as hereinafter provided, in sections entitled ‘Self-Destruction’ and ‘Occupation’.”

The self-destruction clause referred to is in the following language: “Self-Destruction. In ease of self-destruction within two years from the date of this policy or of any reinstatement thereof, whether sane or insane, whether or not the insured from the lack of possession or control of his mental powers, understands that the act he is committing will probably result in his death, the sum payable hereunder shall be one-tenth of the principal sum of the policy, or its cash value, whichever is greater, less any indebtedness thereon to the company.”

After reinstatement the premiums were paid up, and the policy was in full force at the time of the death of the insured, which resulted from poison self-administered.

Appellee is the publie administrator of Jackson county, Mo., and, as such, the duly appointed and acting administrator of the estate of Thomas B. Willhoit, deceased. His petition on the policy was in two counts. The cause of action on the first count is thus stated: “Plaintiff states said policy provides and defendant agreed to pay, by the terms thereof, the sum of two thousand dollars in the event of the death of the said Thomas B. Willhoit; and that in addition thereto, plaintiff is entitled to a refund of six per cent on a loan on said policy, said refund amounting to nine dollars and sixty-five cents, and in addition to said refund to six credit coupons attached to, and a part of said policy, said coupons amounting to one hundred seven dollars and sixteen cents together with four per cent compound interest thereon, said interest amounting to the sum of twelve dollars and fifty cents, making a total additional sum of one hundred twenty-nine dollars and sixty cents, less a loan on said policy in the sum of two hundred twenty-eight dollars, leaving and making the total amount due on said policy on the first count thereof, the sum of nineteen hundred one dollars and thirty-one cents.”

The second count declared on the double indemnity clause applicable in case of accidental death. Before suit respondent agreed to waive this second count if appellant would pay the face of the regular policy — $2,000, less indebtedness, plus dividend coupons. Appellant declined, contending that its liability was limited to $189.21 under the terms of the self-destruction clause quoted above.

A jury was waived in writing. The court rendered a general judgment in favor of appellee for the full amount claimed on both counts. On the first count damages (10 per cent.) and attorney’s fees in the sum of $750 were assessed for vexatious refusal to pay as provided by the Missouri statute.

It is not denied that the insured died by his own hand. Respondent claims that he was insane when the act of self-destruction was committed, that the contract of reinstatement was a new contract, consummated in Missouri, and that under the laws of that state (Section 6150, Rev. St. Mo. 1919) the defense of suicide is denied to appellant. Scales v. National Life & Accident Ins. Co. (Mo. Sup.) 212 S. W. 8; Brunswick v. Standard Accident Ins. Co., 278 Mo. 154, 213 S. W. 45, 7 A. L. R. 1213.

In the state of the record our review at most would be limited to questions arising on the pleadings, and none are presented by the assignment of errors. This was an action at law, tried to the court on a written waiver of jury. There were no requests for findings of fact or conclusions of law, and none were made or given. No demurrer to the evidence was filed, nor motion for judgment at the close of all the evidence. The record discloses a mere general finding and judgment for appellee. Merriam v. Huselton (C. C. A. 8) 45 F.(2d) 983; Buechle v. Montgomery et al. (C. C. A. 8) 45 F.(2d) 987, 988; Fleischmann Co. v. United States, 270 U. S. 349, 46 S. Ct. 284, 70 L. Ed. 624.

In Bueehle v. Montgomery, supra, under a like state of the record, we held that nothing was presented for review, quoting from previous decisions of this court as follows:

“ ‘When an action at law is tried by the court upon a written waiver of jury, the appellate court cannot consider the question of whether or not there is substantial evidence to support the trial court’s finding unless the question is raised and presented in that court for its decision.’ Pennok Oil Co. v. Roxana Petroleum Co. (C. C. A. 8) 289 F. 416, 418; McFarland v. Central National Bank (C. C. A. 8) 26 F.(2d) 890.
“ ‘The question of law whether or not there was any substantial evidence to sustain any such finding is reviewable, as in a trial by jury, only when a request or a motion is made, denied, and excepted to, or some other like action is taken which fairly presents that question to the trial court and secures its ruling thereon during the trial.’ Wear v. Imperial Window Glass Co. (C. C. A. 8) 224 F. 60, 63; Allen v. Cartan & Jeffrey Co. (C. C. A. 8) 7 F.(2d) 21, 22.”

However, on the merits our decision would not be otherwise. There was ample evidence to the effeet that 'deceased was of unsound mind when he took the lethal dose. The contract of reinstatement was a new contract. The insured was a citizen and resident of Missouri and the last act essential to the consummation of the contract of reinstatement took place there. The certificate issued by appellant expressly states that “the policy is hereby reinstated effective upon manual delivery of this certificate to the policy holder while alive and'in good health.” That manual delivery was made in Springfield, Mo. Wastun v. Lincoln Nat. Life Ins. Co. (C. C. A. 8) 12 F.(2d) 422; Lincoln Nat. Life Ins. Co. v. Hammer (C. C. A. 8) 41 F.(2d) 12, 17.

• It will thus be seen that, in any view, the judgment below must be affirmed. It is so ordered.


author: PER CURIAM.

text:
    STATE-PLANTERS’ BANK & TRUST CO. et al. v. PARKER et al. EDWARDS-SLAUGHTER CO., Inc.
    No. 2826.
    Circuit Court of Appeals, Fourth Circuit.
    May 1, 1931.
    Percy S. Stephenson, of Norfolk, Va., and Littleton M. Wickham and R. T. Barton, both of Richmond, Va. (Leake & Buford, Christian & Barton, and William A. Moncure, Jr., all of Richmond, Va., and C. S. Towles, of Reedville, Va., on the brief), for appellants.
    John W. Oast, Jr., and Leon T. Seawell, both of Norfolk, Va., for appellees.
    Before WADDILL, PARKER, and NORTHCOTT, Circuit Judges.
   PER CURIAM.

This is an appeal from orders entered in the bankruptcy proceedings -of the Edwards-Slaughter Company; and the principal question involved is the power of the District Court to enjoin proceedings in a state court instituted more than four months prior to bankruptcy to determine the rights of lien claimants in a fund now claimed by the trustees as representing the bankrupt. There is raised also the question of the power of the court in a summary proceeding, as distinguished from a plenary suit, to order that the fund be paid over to the trustees when it appears that such fund is adversely held by a third person under a substantial and bona fide claim of right. From orders entered by the court below in favor of the trustees, in bankruptcy, this appeal was taken by the State-Planters’ Bank & Trust Company, and its attorneys, who were enjoined from prosecuting the proceedings in the state court, and by the First National Company, one of the parties to those proceedings.

The facts out of which these jurisdictional questions arise are as follows: The bankrupt, on July 1, 1925, executed a deed of trust on certain property to the State-Planters’ Bank & Trust Company, hereinafter called the bank, to secure $60,000 in bonds, the payment of which was guaranteed by the First National Company. The bankrupt also executed and delivered to the hank its promissory note in the sum of $20,000, secured by a preferred maritime mortgage on the steamship M. M. Davis, to be held under the terms of the deed of trust as security for the bonds. It also delivered insurance policies upon the steamship in the amount of $60,000, payable to bankrupt and to the bank as trustee, in accordance with article 10 of the deed of trust, which required that, so long as any of the bonds should be outstanding, bankrupt should carry fire and marine insurance on its steamers indorsed to the trustee. Later, when these policies were about to lapse for nonpayment of premiums, the bank paid the premiums and renewed the policies with funds paid to it upon demand by the First National Company, the guarantor of the bonds secured.

The steamship was destroyed by fire on September 18, 1927, and there was collected on the policies insuring it the net sum of $58,256.67. A controversy arose as to whether the whole of this amount or only $20,000 thereof was applicable to the bonds secured by the deed of trust, the bank contending that it was entitled to apply the entire amount to this purpose, because of a provision of the deed of trust to the effect that all proceeds of insurance should be treated in the same manner as proceeds from a sale by foreclosure and should be applied in payment of bonds. For the purpose of determining this controversy, it instituted a suit in chancery, filing a bill of complaint in the circuit court for Northumberland county, Va., against the bankrupt and others, in which it alleged that the holders of the bonds and interest coupons secured by the deed of trust were entitled to-the entire proceeds of the insurance policies, but that, as certain claims had been asserted against these proceeds by others than the bond and coupon holders, it desired to have the guidance and protection of the court, and therefore requested it to supervise the distribution of the fund. The bill in the state court is not set forth in the record, and the nature of the claims asserted by persons other than the holders of bonds and coupons does not appear, but we do not think that this is material, for the reason that it does appear that the suit in the state court was instituted by the bank as the holder of the fund in controversy and as representative of the bond and coupon holders against the mortgagor in order that the court might pass upon the liens asserted and direct ¡how the funds should be distributed. The bankrupt and the guarantor filed answers to the bill, alleging that the entire proceeds of the insurance should be used in payment of the bonds and coupons and praying that same be so used.

The suit in the state court was instituted February 8, 1928. The date of the filing of answers by the bankrupt and the guarantor does not appear, but was sometime between February 8 and May 24, 1928. On the latter date the suit was referred to a master in chancery, who on September 29th filed his report therein. Prior thereto, on August 8, 1928, the Edwards-Slaughter Company had been adjudged a bankrupt, and when the master’s report was filed on September 29th a rule was issued by the judge below against the bank and its attorneys to show cause why they should not be enjoined from further prosecuting the suit in the state court. This rule was made absolute on October 23, 1928, and on November 1st an order was entered directing the bank to pay into the bankruptcy court the fund in its hands. From these orders the bank and its attorneys appealed. The guarantor, not having been made a party to the rule, filed its petition setting forth the facts of the ease, challenging the jurisdiction of the court to interfere with the proceedings in the state court, or by summary proceedings to require an adverse claimant of the fund in controversy to pay same into court, and praying that the injunction and order be set aside and the fund returned to the bank. The court, upon objection by the trustees in bankruptcy, declined to permit the guarantor to intervene or file its petition; and it, also, has appealed.

' Upon a disagreement of the judges of this court, certain questions were certified to the Supreme Court. The certificate was dismissed by that court (State-Planters’ Bank & Trust Co. et al. v. Parker et al., 51 S. Ct. 463, 75 L. Ed. -); but in view of what was said in the opinion dismissing the certificate and of what was said by the court in deciding the companion case of Straton et al. v. New, Jr., et al., 51 S. Ct. 465, 75 L. Ed. -, we think that the court below was without jurisdiction to enjoin the proceedings in the state court in this case or to order the fund in controversy paid into the registry of the court. The orders appealed from will, therefore, be reversed, and the cause will be remanded, with directions that an order be entered for the return of the fund in controversy to the bank, to the end that the circuit court of Northumberland county may proceed to determine the rights of the claimants in the fund and direct its disposition.

Reversed.

Note. — Judge WADDILL, who sat in the hearing of' this ease, died before the case was decided and did not participate in the decision.


author: HUTCHESON, Circuit Judge.

text:
    PUTNAM NAT. BANK v. COMMISSIONER OF INTERNAL REVENUE.
    No. 6173.
    Circuit Court of Appeals, Fifth Circuit.
    May 27, 1931.
    J. V. Walton and Thos. B. Dowda, both of Palatka, Fla., for petitioner.
    , G. A. Youngquist, Asst. Atty. Gen., Se-wall Key, Sp. Asst, to Atty. Gen., C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and James K. Polk, Jr., Sp. Atty. Bureau of Internal Revenue, both of Washington, D. C., J. Louis Monarch and Norman D. Keller, Sp. Assts. to Atty. Gen., for respondent.
    Before BRYAN, SIBLEY, and HUTCH-ESON, Circuit Judges.
   HUTCHESON, Circuit Judge.

Petitioner, having in 1921 made a partial charge off and had allowed as a bad debt a deduction of $18,000 on account of bonds held by it, was required by the Commissioner when that amount was collected on the bonds in 1925, to return it as taxable income for that year. On appeal to the Board of Tax Appeals, the action of the Commissioner was sustained, and the case comes here for review of the Board’s decision.

The facts, as stipulated and found by the Board, are: That petitioner, a national hank, in 1931 accepted in lieu of notes due it thirty-nine bonds of the face value of $1,000. That, after controversy and protest, petitioner was ordered by the bank examiner to write off 60 per cent, of their face. “On December 23,1921 petitioner’s directors voted to charge off 60% of the face value of the bonds pursuant to the instructions of the chief national hank examiner and on December 31,1921 the amount of $23,400 was charged to profit and loss. The amount so charged off was claimed as a deduction by petitioner in its return, for 1921 and allowed by the respondent. The face value of the bonds was subsequently paid * * * in 1925, $30;000. Sixty per cent of this amount was on petitioner’s booká credited to profit and loss, and reported as taxable income in its return.”

As the Board noted in its opinion, “though the petitioner does contend that the charge off and deduction was not a propeí one, because no loss was actually sustained in 1921 in respect of the bonds nothing was offered to show whether or not petitioner was warranted in making the charge off. The stipulated facts do not cover the matter of partial worthlessness in 1921. * * * ” They “fall far short of establishing that the , charge off as made in 1921 was improper.”

It seems to he taken for granted, as indeed it must be, that, if the 1921 deduction was properly claimed and allowed; that is, if in law and in fact the bonds were in that year ascertained to be to that extent worthless, any later collection of such debt must be retumed.as income. Carr v. Com’r (C. C. A.) 28 F.(2d) 551; Davidson v. Lucas, 59 App. D. C. 176, 37 F.(2d) 806; Sanford & Brooks Co. v. Com’r (C. C. A.) 35 F.(2d) 312, 314; Burnet v. Sanford & Brooks Co., 282 U. S. 359, 51 S. Ct. 150, 75 L. Ed. 383; T. D. R. 62, art. 151; T. D. R. 60, art. 50; Brewster v. Gage, 280 U. S. 327, 50 S. Ct. 115, 74 L. Ed. 457; Fawcus Machine Co. v. U. S., 282 U. S. 375, 51 S. Ct. 144, 75 L. Ed. 397.

Petitioner pitches its case against the action of, the Board upon the proposition that the debt was not in fact determined to be worthless; that no loss in fact actually oo-curred in 1921; that therefore the moneys received in 1925 were not income, but merely payment of the principal due on the debt.

To this contention respondent opposes two propositions: (1) That the record presents nothing from whieh it could be found that the taxpayer did not ascertain and declare a partial loss on account of the bonds; on the contrary, it affirmatively establishes that it did, and that, what would be petitioner’s rights if the record were otherwise, presents for decision, not an issue having real substance, but a mere hypostasis. (2) If petitioner could show that there was no loss, it would, because in 1921 it claimed and received a deduction as for a loss, be now es-topped from doing so.

Respondent’s first proposition is correct, and disposes of petitioner’s appeal.

“The power of taxation is a fundamental and imperious necessity of all government.” Tyler v. U. S., 281 U. S. 503, 50 S. Ct. 356, 359, 74 L. Ed. 991, 69 A. L. R. 758.

“The Sixteenth Amendment was adopted to enable the government to raise revenue by taxation. It is the essence of any system of taxation that it should produce revenue ascertainable, and payable to the government, at regular intervals. Only by such a system is it practicable to produce a regular flow of income and apply methods of accounting, assessment, and collection capable of practical operation.” Burnet v. Sanford, 282 U. S. 359, 51 S. Ct. 150, 152, 75 L. Ed. 383.

“Taxation, as it many times has been said, is eminently practical.” Tyler v. U. S., 281 U. S. 503, 50 S. Ct. 356, 359, 74 L. Ed. 991, 69 A. L. R. 758. Because of these considerations, it is necessary for a taxpayer to show the illegality of the exactions whieh he opposes. Reinecke v. Spalding, 280 U. S. 232, 50 S. Ct. 96, 74 L. Ed. 385. The burden in each ease to establish the faets whieh entitle it to the deduction or relief claimed is upon the taxpayer, and the real point in each case is whether that burden has been sustained by adequate evidence. Reinecke v. Spalding, supra.

Here the Commissioner, as a basis for his determination, found that the bonds, to the extent.whieh he required the collections for 1925 to be returned as income, had been ascertained by the taxpayer to be worthless in 1921, and a deduction on that score claimed by the taxpayer had been allowed it. Before the Board, the taxpayer not only presented no evidence to the contrary, but by stipulation it agreed that the facts were just as the Commissioner first and the Board later, found theih.

The decision of the Board is affirmed.