author: GLENN, District Judge.

text:
    THE CALVERT. EASTERN TRANSP. CO. v. INSLEY.
    No. 3118.
    Circuit Court of Appeals, Fourth Circuit
    June 19, 1931.

      L. Vernon Miller and George Weems Williams, both of Baltimore, Md. (Marbury, Gosnell & Williams, of Baltimore, Md., on the brief), for appellant.
    Henry L. Wortche and George Porbes, both of Baltimore, Md., for appellee.
    Before PARKER and NORTHCOTT, Circuit Judges, and GLENN, District Judge.
   GLENN, District Judge.

This is an appeal from a final decree of the District Court of the United States for the District of Maryland, in admiralty, entered January 14th, 1930.

This decree denied the petition of the appellant for limitation of liability as owner of a certain barge Calvert, and awarded damages to the appellee, Mary M. Insley, ad-ministratrix of the estate of Everett C. Ins-ley, who was the master of the barge.

The barge had foundered in the Chesapeake Bay in the early morning of May 17, 1928, and in the disaster the master, his wife and three children were drowned.. As the immediate dependents of Captain Insley perished along with him, his mother properly qualified as administratrix of his estate and prosecuted this action. While, of course, Insley’s own family were his chief dependents, the evidence does show that his mother was dependent on him to a certain extent.

An action was started in the Maryland court by the claimant here, and this was followed by a petition of the Eastern Transportation Company, a corporation, for limitation of liability as owner of the barge Calvert. This petition was brought under terms of 46 USCA §§ 183, 184 and 185, Revised Statutes, §§ 4283, 4284, and 4285. The District Court heard the evidence which covered a wide range, and in which there were numerous controverted questions of fact. The court wrote a full opinion dealing with all of the questions of fact and propositions of law involved. This opinion is published in 37 E. (2d) at page 355, 1930 A. M. C. 258. The decision of the court as there reported in full may be summarized in the following findings : (1) That the barge Calvert was unsea-worthy at the time of her departure from Sparrow’s Point, Md.; (2) that the unseaworthiness of the barge was the proximate cause of the foundering; (3) that the unseaworthiness was therefore the proximate cause of the death of the appellee’s intestate; (4) that her unseaworthiness was due to such negligence on the part of managing officials of the appellant company as to preclude it from availing itself of the defense of limitation of liability on the ground of lack of privity of knowledge; (5) that the appel-lee’s intestate had not assumed the risk arising from the defect of the character disclosed in the present ease; (6) that the appellee, mother of Everett C. Insley, deceased, was dependent upon him to a certain extent, and assessed the damage at $7,000.

The appellant has appealed from this decision, as outlined in the opinion and made effective in the resulting decrees, taking issue with practically every phase of the decision. It has been stated time without number that on an appeal in admiralty the findings of fact of the trial court based on conflicting evidence will not be disturbed on appeal, unless it is shown that such findings are clearly without support in the testimony. The rule is stated by this court in three cases.

In the case of Chesapeake Lighterage & Towing Co., Inc. v. Baltimore Copper Smelting & Rolling Co., 40 F.(2d) 394, at page 395, 1930 A. M. C. 804, this court said: “It has been long settled in this court that the finding of the District Court having support in the evidence will not be reversed unless we reach the conclusion that that finding is clearly wrong.”

In the ease of Malston Co. v. Atlantic Transport Co. et al., 37 F.(2d) 570, this court, in a per curiam opinion, at page 571, said: “The trial judge saw the witnesses and heard them testify, and, in addition to this, is familiar with the location where the collision occurred. In such case it is well settled that we would not be justified in reversing his findings unless we are prepared to say that they are clearly wrong, whieh, under the record here, we certainly could not do. His findings are supported by evidence, and, while there is some evidence to the contrary, it is not such as would justify a reversal.”

And in Lewis v. Jones, 37 F.(2d) 72, at page 74, this court said: “On the second question, it is unnecessary to cite authority to sustain the proposition that the finding of the trial judge, who had the opportunity of seeing the witnesses, hearing their story, judging their appearance, manner, and credibility, on the question of fact, is entitled to great weight, and will not be set aside unless clearly wrong.”

These rules are particularly appropriate to the ease at bar. During the trial, there were many witnesses who testified on every phase of the case. The history of the barge was thoroughly covered in testimony. The transactions immediately surrounding the disaster were covered by the testimony of the captain of the tug Denhardt, which was towing the barge at the time, and by that of his mate and the crew of the barge McDonald, which barge was in the same tow. The mate of the Calvert, who was on duty at the time of the disaster and who alone of the crew survived, testified. There was full testimony from the diver who helped raise the Calvert. There were the usual surveyors and experts expressing opinions. There were many side issues gone into which reflected on the interest, bias, and accuracy of several of the witnesses. The petitioning company did not call their own surveyor, but he was produced by the claimant, and his conclusions are not in complete accord with the facts to whieh he testified. The record shows that considerable’ feeling was developed during the trial, and that there was much necessity for the trial judge to determine the credibility of the witnesses. He was in position to do this much better than is this court. We agree generally with the conclusions of the trial judge on the questions of fact which were made the basis of his decision. While we think it would be unnecessary to repeat his digest of the testimony, we think that we should point out the circumstances under whieh the Calvert sank.

The barge Calvert, which belonged to the defendant company and had been in service for a number of years, was loaded with seven hundred and fifty long tons of crushed slag. The cargo was to be transported to Urbana, Va. The intended voyage, therefore, involved a trip down the' .Chesapeake Bay, which was a customary trip for this barge. She was in charge of Insley, who, with the tacit permission of the company and in accord with the common practice, had his family on board. The only other person on board the Calvert was the mate, Brock. Brock survived the disaster and testified before the court. During the evening of May 16, 1928, the Calvert was taken in tow by the tug, Denhardt, along with another barge, the B. W. McDonald; all three of the vessels being owned and operated by the defendant company. The tow was made up in the order of the tug Denhardt, the Calvert, and the McDonald, whieh was light. The Calvert followed the tug at a distance of one hundred and twenty-five fathoms, and the McDonald followed the Calvert at a distance of fifty-five fathoms. It is undenied that the weather was mild and cloudy with a moderate southeast wind and no sea worth speaking of. The testimony of the captain of the tug and of the master of the stem barge McDonald is that everything went along well until midnight. The mate of the tug testified that as late as one o’clock all three vessels were in satisfactory condition, and the tow was proceeding satisfactorily down the bay. The first indication of any trouble about whieh any survivor could testify with accuracy is given in the testimony of the mate of the tug. He testified that about one .o’clock he noticed that the tug’s engine had slowed down slightly, whieh he, at the time, attributed to a drop in the steam pressure; but which subsequent events show to have been caused by the extra pull required to tow the sinking Calvert. The District Court found as a fact, and we concur therein, that the hawser did not slip off of the bit on the Calvert until she was well under water. The mate of the tug, a few minutes later, heard a cry in the rear of the boat. Upon going outside he discovered that the Calvert was missing and that someone was in the water slightly to his rear. He immediately reversed the tug and began search for the Calvert. The captain, being awakened in the meantime, took charge of the situation and they instituted a thorough search for the Calvert and her crew. Brock, the sole surviv- or, was picked up out of the water and did not give a very satisfactory account of what had happened. Although the captain and his mate as well as the crew of the McDonald searched for hours, they were never able to find any trace of the Calvert or of the Insley family. In the meantime, a large vessel came up the bay and assisted in the search with the use of her lights.

The diver testified fully as to the condition in which he found the Calvert on the bottom and as to the method used by him in passing the cables underneath the body of the Calvert so as to raise her. When she was towed in and put on the ways she was examined thoroughly by surveyors, and the District Court had the benefit of their testimony and opinions. In the light of all the opinions and the available findings of fact, several suggestions were made as to the way in which the Calvert sank and what caused her to sink.

The claimant relied upon the explanation of a general unseaworthiness due to the rotten condition of - the bottom — with many small leaks. The owner, Transportation Company, stressed the importance of a scar which/-was found on the side of the barge when she was put on the ways. The contention was that this scar was sufficient to cause a sudden sinking, and that its course showed that the barge had struck some submerged object and then passed over it. It was pointed out that the striking of submerged objects is not an infrequent occurrence in navigation, that the insurance records and law books contain many such eases. It is further pointed out that this view is consistent with the failure of the diver to find any object immediately under the Calvert when he went down to raise her. The importance of the sear was urged upon the court with great earnestness as being the proximate cause of the disaster, and as negativing the explanation that the cause was the general unsea-worthy condition of the barge.

The District Court dismissed, and we do also-, the explanation that she struck some object floating beneath the surface. Experience as revealed in testimony and reported decisions, as well as the well-established laws of physics, are against the logic of any such conclusion. The District Court found on the evidence that her unseaworthy condition was the real cause of the foundering.

The sudden foundering of the barge, as explained in the opinion, is not at all inconsistent with the proposition that she was un-seaworthy by reason of a number of slow leaks and one particularly bad place in her side. It occurs to this court also that the foundering may not have been so very sudden. We have already referred to our opinion that Brock, who was the only man supposed to be awake on the Calvert, was in all probability asleep; and his meager testimony is doubtless explained by the fact that the first he knew of the sinking was when the water was actually up around his body. The parties to this suit had considerable trouble locating Brock and producing him as a witness. The testimony with reference to his movements and his conduct generally leads us to believe that he was probably an irresponsible person; and we cannot help but feel that he was in all probability asleep when the Calvert began to founder. Certainly, if he had been wide awake, he should have been able to have given a more logical and reasonable account of the disaster than is found in his testimony. Since the master and his family are dead and Brock’s testimony, even if true in every respect, is very meager, the District Court was forced to rely upon inferences from other testimony as to exactly how the Calvert sank. In fine we agree with the District Court in its finding of fact that the disaster was due to the unseaworthy condition of the barge at the time she set out upon this voyage. He sums up Ms full discussion of the testimony and very logical reasoning thereon as follows:

“Therefore it may fairly be said of Mitchell’s testimony on this point that it was an attempt 'to soften’ the st.ory that Ms survey told, and that he was in error as to the probable length of time a vessel in such condition could remain afloat. The fact remains that she did sink, and all of the evidence bears out the conclusion that it must have been caused by a combination of the various defects in her seams and planking -(after all due allowance is made for the added damage caused to her seams and planking, due to warping and straining wMle being raised), permitting the ingress of water slowly, but constantly, until her buoyancy was suddenly lost and she sank. Mitchell testified that he found a lot of decayed material in the Calvert. She was twenty-eight years old, and, while she was rebuilt in 1923, she had not been drydoeked for a year and a half, and there is no- evidence that any repairs had been made upon her following a stormy voyage which she had taken the previous April. Furthermore, only a comparatively small amount of repairs had been made during the previous 15 months, and there is no evidence of any surveys having been made, which would have-shown her exact condition prior to the disaster.
“All of these circumstances lead to the inevitable conclusion that the gradual intake of water, for how long will never be known, but for at least a considerable time prior to her actual foundering, was the cause of her going down; and the fact that her gradual settling, which must have taken place before the final sinking, was not noticed by her mate, is not unnatural, because of her character and size and that of her cargo, and the fact that she started out with very little free-board. A fortiori no weight is to be given to the fact that those on the other barge and the tug detected no settling, because of the distance that they were separated from the Calvert.
“The weight of the evidence leads fairly to the conclusion of unseaworthiness. The unusual character of the disaster, its suddenness, and the fact that it has forever sealed the lips of those who presumably could best explain the cause, invite speculation. It is easy to assert that the cause is beyond explanation, but a complete analysis of the evidence does not reasonably permit us to do so.”

This conclusion, while of course depending upon the facts of this particular case, finds support in the decisions by other courts in similar eases. We quote from Oregon Round Lumber Co. v. Portland Lumber Co. (D. C.) 162 F. 912, 920 where Judge Wol-verton says: “ * * * It not infrequently transpires that a vessel, after entering upon her voyage or engaging in the service for which she is dispatched, becomes unsea-worthy, and damage ensues, without any apparent cause from stress of weather or collision in • any way, or undue or. negligent abuse in handling and navigating her, and in every such ease the presumption obtains that she was unseaworthy at the time of entering upon her service. How else could her condition be accounted for? In the case of The Arctic Bird (D. C.) 109 F. 167, the barge, the subject of libel, was taken in tow, having cargo on board, and, having proceeded for six hours on her voyage, sank without receiving injury from any known souree, and without encountering strong wind or rough sea. The court held it was to be presumed that the barge was unseaworthy at the outset; otherwise, there was no cause or way to account fot her action in failing to- perform the functions for which she was dispatched. The court quotes, as authoritative, from Du-pont de Nemours v. Vance, 19 How. 162, 15 L. Ed. 584, as follows: ‘As to what constitutes seaworthiness, it has been uniformly held that if a vessel springs a leak, and founders, soon after starting upon her voyage, without having encountered any storm or - other peril to which the leak can be attributed, the presumption is that she was unsea-worthy when she sailed.’ And also from Work v. Leathers, 97 U. S. 379, 24 L. Ed. 1012: ‘If a defect without any apparent cause be developed, it is to be presumed it existed when the service began.’ ”

Adopting the view, therefore, that the sinking of the barge was due to her unsea-worthy condition at the beginning of the voyage, which after all was only three or four hours before the disaster occurred, we pass next to the right of the appellant to limit its liability. We also think that the District Court decided this matter correctly.

The testimony is that the responsible of--fieials who were charged with the inspection of the barges belonging to the defendant company had adopted a very loose and careless practice of making this inspection. They seemed to have relied chiefly upon remedying small defects which were called to their attention by the bargemen. They admitted that there were no annual or semi-annual inspections. The testimony was that this particular barge had on a trip shortly previous been carrying fertilizer, and that •at the end of the voyage this fertilizer was damaged. All of the men who had handled the Calvert agreed that they were forced to use pumps almost constantly to keep her afloat. If the inspecting officers did not know of the very bad condition in which the Calvert was before entering upon this trip, such ignorance was due to negligence in making their inspections, or in not making them at all. We agree with the District Court in its findings that the defendant company here is not entitled to limit its liability. It has not sustained the burden which the statute easts upon it before it can claim the benefit of this limitation.

With reference to the assumption of risk, it is clear from statute and decision that it applies in admiralty. Its particular application rests in this ease upon the proposition that no one was in better position to know of the unseaworthy condition of the barge than Insley himself. But as pointed out in the opinion of the District Court, under the terms of the Merchant Marine Act of 1920, the act o£ the seaman in assuming the risk must have been voluntary and not under restraint. It would be an extremely harsh application of this rule and one which we believe has never been invoked by a court of admiralty, to hold that a master of a vessel assumed the risk of the unseaworthiness of a vessel by continuing in the employ of a company whose duty it was to see that the vessel was seaworthy. Furthermore, the nature of the defects in this particular case were such that a mere bargeman, as Insley was, would be slow to ascertain and appreciate. They could have been easily determined by the company and its inspectors, if the vessel had been hauled out and examined thoroughly. We have never understood that the mere knowledge on the part of a bargeman that a vessel was leaking somewhat and his continued employment with this knowledge makes out the defense of assumption of risk against damage due to a general unseaworthy condition. Assumption of risk involves the ready and willing acceptance of risks which are known and thoroughly appreciated. The maxim is “volenti non fit injuria,” not merely, “seienti non fit injuria.” The decision of the District Court on the assumption of risk feature of the case is based on logical interpretation of the facts of this ease, and the law as stated in the cases cited in the opinion. There is no need here to repeat discussion or citation.

We cannot escape the conclusion, however, that the award of $7,000 was excessive under the proof. If Insley alone had perished, and the suit were brought by the widow for the benefit of herself and minor children, the proof of dependency would have been much stronger and the recovery much larger.

As is well said in regard to this type of case: “Inasmuch as the deceased were (with two or three exceptions) of age, the relationship carries, as a rule, no legal obligation of support. * * * Where parents are claimants, therefore, regard must be had solely to actual contribution. Occasional gifts will not form the basis for pecuniary loss, unless they are sufficient to indicate a consistent purpose to contribute. Moreover, the continuity of contributions to parents can hardly be regarded with the same assurance as support of wife and children. It must also be borne in mind that the shorter expectancy of life of the parents prevails.” The City of Rome (D. C.) 48 F.(2d) 333, 338, 1930 A. M. C. 1841.

Brushing aside the feeling of sympathy and horror which we naturally have in contemplation of a disaster which caused the simultaneous death of a man, his wife, and three small children, and getting down to the actual proof of dependence on the part of the mother, we feel compelled to reduce the amount of the recovery.

The testimony shows that Insley, devoting the larger part of his income to his own wife and children, did not actually contribute very much to the support of his mother. She had other sons who were helping to bear her expenses. The testimony actually shows that he had contributed about twenty dollars a month to his mother’s support for a period of a year and a half. It also shows that all along over long periods he had contributed practically nothing to her support. We must consider also that as part of the consideration of the $20 a month payment, and the irregular contributions towards rent, coal, and provisions, that she was supplying a common home for her children and their families, and it is reasonable to assume that the contributions towards provisions and the like were made at irregular intervals and at such times as the deceased and his family shared the common home. Neither does the District Court in arriving at the amount of $7,000 seem to have taken into consideration the earning power of money during the 20.20 years of admitted expectancy on the part of the mother. Taking everything into consideration, we think that the recovery should be fixed at $4,000.

The effect of this opinion is, therefore, to adopt the findings of fact, conclusions, of law, and the decision as made by the District Court on all features of the ease, except that of the amount of recovery.

The amount of the recovery is fixed at $4,000. With this one modification, the decree of the District Court is hereby affirmed.

Affirmed with modification.


source: Caselaw Access Project

author: BUFFINGTON, J.

license: Public Domain

text:
    NATIONAL GRAIN YEAST CORPORATION v. MITCHELL, Attorney General, et al.
    No. 4566.
    Circuit Court of Appeals, Third Circuit.
    July 7, 1931.
    Walter Winne and Winne & Banta, all of Hackensack, N. J., and Semmes, Bowen & Semmes, of Baltimore, Md., for appellant.
    Phillip Forman, U. S. Atty., of Trenton, N. J., and R. H. Woolsey, of Philadelphia, Pa., for appellee.
    ‘Before BUFFINGTON, DAVIS, and THOMPSON, Circuit Judges.
   BUFFINGTON, J.

In the court below the National Grain Yeast Company filed a bill against the federal officials named therein, hereinafter called defendants, to compel the issuanee'of a permit to it to operate an industrial alcohol plant, bonded warehouse, and denaturing plant. From the record it.appears that after hearing by defendants, in which the yeast company had full opportunity to present evidence, its application was refused. On final hearing, the court below entered a decree stating that “the Court being of the opinion that the complainant herein is not entitled to the relief prayed for and that the action of the defendants in refusing to issue to the complainant the permits applied for is both reasonable and warranted and, therefore, neither arbitrary nor capricious,” ordered “that the bill in this case be dismissed.”

After a study of the proofs and careful consideration had we have reached the same conclusion. From those proofs it appears that Samuel Brass has invested $60,000 in the complainant company and owns practically all of its stock. He has no real estate or other assets and has no experience in making alcohol. To carry on the business he has borrowed from “friends,” on his personal note, and without security, some $240,000. He has paid no interest on these loans. When requested at the hearing to disclose the names of those who furnished, without security, this large sum, he refused to do so. In view of this situation, Judge Runyon, in his opinion in the court below, held:

“After due and full consideration of the question of the application herein, I am of the opinion that the insistence of the Governmental authorities that Mr. Brass make full disclosure as to his financial backers is both reasonable and warranted.
“For, while such a permit as is here sought would doubtless be, in the hands of a careful, law-abiding citizen meticulously safeguarded, and used only in the fulfillment of that for which permission was given, the same permit in the possession of, or under the control of, one or more persons evilly-minded, might and could beeome a potent agency for the infraction and nullification of law.
“Therefore, it becomes the duty of those to whom control of the manufacture of this necessary and yet troublous commodity is confided to ascertain as fully as possible each and every interest which may be involved in such production.”

' We agree therewith. Permits issued to make and vend alcoholic commodities should only issue to those in whose character confidence exists, and it is the right of those responsible for their issuance to insist upon knowing, and it is the duty of-every applicant to disclose, inter alia, all those interested in the venture. Where this duty of full and frank disclosure on the part of the applicant is refused, as was here done, the applicant’s own action affords ground for the refusal to grant a permit;

The decree below is affirmed.


author: PER CURIAM.

text:
    COGAR v. COMMISSIONER OF INTERNAL REVENUE.
    No. 5592.
    Circuit Court of Appeals, Sixth Circuit.
    May 13, 1931.
    For former opinion, see 44 F.(2d) 554.
    Frank V. Benton and C. W. Yungblut, both of Newport, Ky., for petitioner.
    Helen R. Carloss, of Washington, D. C. (G. A. Youngquist, Asst. Atty. Gen., and J. Louis Monarch, C. M. Charest, and Dean P. Kimball, all of Washington, D. C., on the brief), for respondent.
    Before DENISON, HICKS, and HICK-ENLOOPER, Circuit Judges.
   PER CURIAM.

The original petition of the taxpayer, the answer of the Commissioner thereto, the finding of facts by the Board of Tax Appeals, the order of the Board denying a review of its findings, and the petition to rehear, all support our conclusion [44 F.(2d) 554] that the petitioner’s testator owned from October 1, 1922, a two-thirds interest of the Emery leasehold in his own right, and the remaining one-third in trust for Baker.

Allowance for depreciation of improvements upon property acquired since March 1,1913, is based upon the cost thereof.

The point of the petition to rehear is that the order of the Board of Tax Appeals should have been affirmed because the case is here solely as a question of law upon the Board’s findings of fact, and because the Board failed to find the cost to the taxpayer of the improvements upon the leasehold. This question does not appear to have been raised before the Board. Had it been, the Board could not have fixed any exact sum that would represent the cost to the taxpayer of the improvements, because the purchase by Andrews was not upon the basis of separate considerations for the lot and the improvements. The price was for the leasehold as .improved.

Upon the hearing before the Board, the parties seem naturally to have assumed that the value of the improvements at the date of the sale to Andrews would comparatively represent their cost. They therefore agreed upon separate values: (1) Por the building; and (2) for the machinery and equipment, and upon the proper rates, in the event depreciation should be allowed. This agreement, as stated in our opinion, was recognized and confirmed by the Board. We see no reason for such a stipulation, except for the purpose of arriving substantially at the cost for taxation purposes of the improvements, but it is urged that these values do not even in a comparative sense represent cost, because the Board failed to definitely find the entire cost of the leasehold With the improvements included. The Board would in all probability have set out in its original findings the aggregate cost of the improved leasehold if the matter, after having been brought to its attention, had been thought material. We think, however, that the respondent’s contention in this particular loses its force in view of the subsequent finding of the Board in its order denying a review, and in which it is stated “the lessee erected buildings and improvements on the property which had a value some forty years later of over three hundred thousand dollars when the original lessee sold this lease to our petitioner for approximately one million dollars subject to all its terms and conditions.”

The petition to rehear is denied.


author: CAMPBELL, District Judge.

text:
    THE REDMAR. THE BERN. THE ASHBOURNE. In re MOTT HAVEN LIGHTERAGE CO.
    No. 11351.
    District Court, E. D. New York.
    April 15, 1931.

      William F. Purdy, and F. C. Mason, both of New York City, for libelant.
    Macklin, Brown, Lenahan & Speer, of New York City (by J. Dudley Eggleston, of New York City), for claimant.
   CAMPBELL, District Judge.

This suit was commenced by the libelant, the owner of the barge Redmar, to recover for the damages to said barge alleged to have' been caused by the negligence of the steam-tugs Bern and Ashbourne.

I find the facts as follows:

At all the times hereinafter mentioned, the libelant was and still is a New York corporation, and was on the day in question the owner “of the barge Redmar, and the bailee of the cargo of said barge consisting of 346 tons of pea coal, bound from Port Reading, N. J. to 138th street and Harlem River, New York City.

The barge Redmar was, prior to and at the time of her being taken in tow, and up to the time of the happening hereinafter described, tight, staunch, strong, and in every respect seaworthy.

The steamtugs Bern and Ashbourne were, during the currency of process herein, within this district and within the jurisdiction of this court.

At 9:30 o’clock p. m. on August 9, 1928, the steamtug Bern, assisted by the steamtug Ashbourne, left Port Reading with a tow of eighteen boats in six tiers of three boats each.

The Redmar was the starboard boat in the second tier, the Reppelier was the starboard bawser boat, and the Liberty was the starboard boat of the third tier, towing under the stem of the Redmar.

The Liberty was not loaded as heavily as the Redmar and stood some four feet higher in the water than the Redmar, and in addition had a cutaway bow.

As the tow was made up, there were about three to five feet of line from the Liberty to the Redmar.

• As the tow proceeded, the Liberty, by reason of her raking bow and the shortness of the lines between her and the Redmar, rode up on the stem of the Redmar, particularly on the port side.

The captain of the Redmar put out a line and a rubber tire, and at his request the captain of the Liberty several times slacked his hawser, but the Liberty continued to pound the Redmar on the port side of the stem, and inflicted damage, including the opening of her seams.

The steamtug Ashbourne assisted the Bern, acting under the orders of the master of the Bern, and was most of the time on the port side up near the head of the tow, or back at the stern on the port side, and for a short period at the stem on the starboard side up next to the last tier, but not at any time along the starboard side of the Reppelier, the Redmar, or the Liberty.

The fog set in thick, and in leaving the Kills the Bern took her tow along the Staten Island shore, passed the ferry, rounded to with the port side of the tow toward Staten Island, and made fast the tow to the lighthouse dock.

In rounding to, the starboard and not the port corners of the boats of the tow came together.

The captain of the Redmar had been up all the day before and that night, and after the tow was tied up> he went into his cabin and fell asleep on the floor.

About 7 o’clock a. m., the captain of the Reppelier and the Liberty woke up the captain of the Redmar, and he barely escaped with his life, as the Redmar sank with her cargo, and both the boat and her cargo were damaged.

The Redmar was raised and taken to dry dock, where it was found that she had su£-fered damage to her stem, particularly on the pox*t side, which had caused her to leak and finally to sink.

From the facts as found, it is appax'ent that there is no liability on the pax*t of the steamtug Ashbourne, as she was a helper tug acting under the orders of the steamtug Bern.

The barge Redmar was seaworthy when taken in tow by the Bern. The captain’s testimony on this point was not contradicted; furthermore, the uneontradieted testimony shows that she had been continuously employed in carrying cargoes of coal, and is still so employed, and that her stem had been almost completely rebuilt and had been re-caulked in April, 1927.

The tow was not properly made up, as the placing astern of the Redmar of the Liberty, having a raked bow and standing so much higher in the water than the Redmar, on such short lines as three or five feet, subjected the Redmar to pounding on the stern by the Liberty riding up on her.

Eor the making up of the tow the Bern was responsible, and it was guilty of negligence in making it up in an improper manner.

Such a condition was not reasonably to be expected, and it was not proof of unseaworthiness on the part of the Redmar that she was caused to spring a leak as the result of such pounding.

The pounding by the Liberty to which the Redmar was subjected was sufficient to open the seams of the Redmar and cause her to leak, even if no timbers were broken where the pounding occurred.

The captain of the Liberty says he did not see her in contact with the Redmar, and this may be true, but he must have known that she was pounding the Redmar, as he says he three times slacked his lines' because of the request of the captain of the Redmar.

The pounding on the stem of the Redmar by the Liberty opened the seams of the Red-mar and caused her to leak, and the leaking of the water was not readily discoverable by her captain, but it caused her to list to port, and finally to sink.

I find as conclusions of law:

That the steamtug Bern negligently made up the tow by placing the Liberty, a boat with a raked bow and much higher freeboard, astern of the Redmar, on such short lines that the Liberty was permitted to and did ride up on and pound the stem of the Redmar, causing her seams to open, the boat to leak and list to port, and finally to sink, and doing •other damage to the Redmar and to her cargo.

The libellant is entitled to recover its damages from the steamtug Bern, with interest and costs, and to have the usual order of reference to determine the amount of its damages.

The steamtug Ashbourne is entitled to a dismissal of the libel, with costs against the libelant..

A deeree may be entered in favor of the libelant against the steamtug Bern, with interest and costs, with the usual order of reference; and in favor of the steamtug Ash-bourne dismissing the libel, with costs against :the libelant.

Settle on notice.

If this opinion is not considered a sufficient compliance with Rule 46% of the Rules in Admiralty, proposed findings of fact and conclusions of law may be submitted, in accordance with this opinion, to aid the court.


author: WOOLSEY, District Judge.

text:
    HARRINGTON BROS., Inc., v. CITY OF NEW YORK et al.
    District Court, S. D. New York.
    July 22, 1931.
    James Rosthal, of New York City, for complainant.

      Bijur & Herts, of New York City (Harry Bijur, of New York City, of counsel), for defendant John J. Kelly, Ine.
    Baar, Bennett & Bullen, of New York City (John P. Hurley, of New York City, of counsel), for defendants Slattery Daino Co., Ine., and Continental Casualty Co.
   WOOLSEY, District Judge.

I give the plaintiff a decree herein with a reference to a master to compute the damages, if the parties cannot agree thereon.

I. This ease, which was before me once previously on a motion by a judgment creditor of the plaintiff to intervene, Harrington Brothers, Inc., v. City of New York, 35 B. (2d) 1009, is now before me on trial.

There are two questions now involved herein:

(1) The validity of the mechanic’s lien, on which the jurisdiction of this court in equity herein depends.

(2) The right of the complainant to a recovery against John J. Kelly, Inc., on the facts shown.

II. I hold that the lien was valid.

The notice of lien which was served under section 12 of the Lien Law of New York, at the department of finance of New York City, on the assistant deputy comptroller, on June 14, 1929, at 2:20 p. m., and entered on the audit lien docket of said department at 2:41 p. m. on said date, reads as follows:

“Notice under Mechanic’s Lien Law
“Comptroller of the City of New York, and to all others whom it may concern:
“Please take notice, and the undersigned hereby states:
“That Harrington Bros., Inc., is a corporation organized under the laws of the State of New Jersey, residing at and with business address and principal place of business at 590 Montgomery Street, Jersey City, New Jersey, and with its principal place of business within the State of New York at 1211 Wyatt Avenue, Borough of Bronx, New York City.
“That it has and claims a lien for the principal and interest of the value and price of the labor and materials hereinafter mentioned upon the moneys in the control of the .City of New York and upon the moneys of such municipal corporation applicable to the construction of the public improvement hereinafter mentioned, to the extent of the amount due or to become due under and on the contract with said municipal corporation hereinafter described, and hereby, further states:
“1. The name of the sub-contractor for whom the labor was performed is John J. Kelly, Inc. and Slattery Daino Co., Ine. is the contractor with the City of New York.
“2. The amount due the lienor is $9,-151.50, and the date when due is the 31st day of March, 1929.
“3. A description of the public improvement upon which the labor was performed is as follows: Section 4, Route 106, Municipal Rapid Transit under-ground railroad excavation and construction extending along the Grand Boulevard and Concourse, between 175th and 183rd Streets in the Borough of Bronx, City of New York.
“4. The kind of labor performed is as follows: furnishing trucks and labor for removal of excavated material.
“5. A general description of the contract pursuant to which such public improvement was constructed is as follows: Contract with Slattery Daino C'o., Ine. as contractor, dated December 3, 1928, covering Route 106, Section 4, known as the Concourse Route of the Municipal Rapid Transit Railroad subway.
“6. The time when the first item of work was performed was March 1, 1929, and the time when the last item of work was performed was March 31, 1929.
“7. This notice is filed pursuant to the Mechanic’s Lien Law of the State of New York, and all acts of the legislature of the State of New York amending or extending the same, or providing for filing mechanic’s liens on account of public improvements. The labor aforesaid was performed for the construction of said public improvement pursuant to said contract with said municipal corporation.
“8. Thirty days have not elapsed since the completion and acceptance of the construction of said public improvement.
“Dated, June 13, 1929.
“Harrington Brothers, Ine.
“By James Vincent Harrington, Treas.”

This lien was duly bonded and discharged on June 20, 1929, on filing with the comptroller of an undertaking given by defendant Continental Casualty Company, duly» approved by an order of the Supreme Court of New York.

It developed on the trial herein that, payment for the work done each month was made according to the informal arrangement existing between tbe complainant and Kelly on the 10th of tbe month following; consequently tbe defendants claim that tbe notice of tbe date when tbe amount claimed was due is subject to a fatal variance and tbe notice of lien is thereby made invalid.

But it is quite clear that tbe inaccuracy as to this date was not intentional and consequently must be deemed a venial mistake.

Notice under tbe Lien Law is supposed to be given by laymen, and its purpose is to make bis pay secure to tbe workman. In view of section 23 of tbe Lien Law, which requires, in order to accomplish this result, a liberal construction of the notice and provides that “a substantial compliance with its several provisions shall be sufficient for tbe validity of a lien and to give jurisdiction to tbe courts to enforce tbe same,” it seems to me that to bold tbe notice of lien in this case invalid for this minor and immaterial inaccuracy would be to defeat, in this case, tbe purpose of tbe Lien Law, without any real reason for so doing.

My decision that this lien is valid notwithstanding tbe mistake as to- tbe due date of tbe payment is supported by tbe principles of construction laid down for such notices in Goldberger v. 74 Second Avenue, 252 N. Y. 336, 342, 343, 169 N. E. 405; Ringle v. Wallis Iron Works, 149 N. Y. 439, 442, 443, 446, 44 N. E. 175.

In tbe last-mentioned ease, O’Brien, J., ■dealt with tbe bind of criticism of tbe notice which I have beard in this ease, as follows, at page 446 of 149 N. Y., 44 N. E. 175, 177: “Tbe statement was not, in fact, strictly correct; but it by no means follows that it was false in a legal sense. When we bear in mind that such contracts are often executed by agents and employees, and that they are not always expressed in terms so clear and explicit as to be free from doubt or ambiguity, it must be an exceptional ■ ease where an appellate court will be warranted in assuming that an incorrect statement in the notice that tbe contract has been performed, or that tbe contract price is due, is a false statement, within tbe meaning of tbe rule. In this ease tbe view of tbe court at special term that it was tbe result of an honest error is tbe more reasonable and just conclusion.” Cf., also, Schwartz & Co., Inc., v. Aimwell Company, 204 App. Div. 769, 772, 773, 198 N. Y. S. 838, and Barrett v. Schaefer, Jr. & Co., 162 App. Div. 52, 55, 57, 146 N. Y. S. 1056.

Intentional or willful misstatements are, of course, held to vitiate a notice of lien. Aeschlimann v. Presbyterian Hospital, 165 N. Y. 296, 302, 303, 59 N. E. 148, 80 Am. St. Rep. 723.

Here there is not tbe scintilla of a suggestion that the mistake in tbe due date was willful or intentional.

It would be a curious result on this vague record if this lien, which is tbe only really fixed and clear bit of evidence in it, should go by the board.

III. Tbe arrangement between Harrington, tbe complainant, and Kelly, was oral and of tbe most informal kind.

In my opinion, it was a promise, but not a binding contract, by Kelly to use Harrington’s trucks as be needed them to take excavated materials away from tbe scene of the Slattery-Daino Company’s operations on tbe subway.

There was not even a promise to use a fixed number of trucks.

Indeed, at tbe commencement of the operation tbe charge for each truck load was not fixed until after tbe trucks bad begun working.

Tbe result is that the arrangement here comes within tbe well-known category of so-called “requirement contracts,” in which, if tbe requirement is not based on a fixed or a priori reasonably ascertainable requirement but depends on the wish, will, or whim of one of tbe parties, tbe so-called contract is not binding on either party as to future performance, although for material or services actually furnished an action is maintainable. Cf. American Cotton Oil Co. v. Kirk et al., 68 F. 791 (C. C. A. 7); Crane et al. v. C. Crane & Co., 105 F. 869, 873 (C. C. A. 7); Cold Blast Transp. Co. v. Kansas City Bolt & Nut Co., 114 F. 77, 81, 82, 57 L. R. A. 696 (C. C. A. 8).

So here, under the principle laid down in those eases, for tbe trucks furnished by Harrington to Kelly during March, 1929, Harrington is entitled to recover. This is so, notwithstanding Harrington’s failure to continue tbe work after March 29th, for tbe legal result of tbe arrangement between Harrington and Kelly was that Harrington was not bound so to continue it.

IV. The first four counterclaims were not pressed at tbe trial, and no proofs put in to support them. They are therefore dismissed.

Tbe fifth counterclaim for storage was admitted by tbe plaintiff, although tbe precise amount due was left open, as I understand tbe stipulation.

V. An order- may be entered providing that this memorandum shall stand as the findings of fact and conclusions of law herein. Briggs v. United States, 45 F.(2d) 479, 480 (C. C. A. 6); Lewys v. O’Neill (D. C.) 49 F.(2d) 603, 618; and cf. The El Sol and The Sac City (D. C.) 45 F.(2d) 852, 856, 857.

VI. If the parties cannot agree as to the amount to be allowed to the plaintiff hereunder, the suit will be referred to a special master to fix the damages. Settle orders on two days’ notice.


author: HUTCHESON, Circuit Judge.

text:
    In re PEREL.
    No. 1272.
    District Court, S. D. Texas, Houston Division.
    April 9, 1931.
    Jones, Roberts & Monteith, of Houston, Tex., for bankrupt.
   HUTCHESON, Circuit Judge.

The bankrupt having applied for his discharge, the matter having been referred to the referee, the referee on- the 18th of December, 1930, filed his report and recommended that the discharge be denied. At -the request of counsel for the bankrupt, action upon the report of the referee was withheld to give bankrupt’s counsel opportunity to further brief the case.

The bankrupt’s counsel having later advised the court that the matter would be submitted upon the briefs already filed, the ¿latter now comes up for disposition.

The referee, in a twenty-five page report, carefully, fully, and fairly considering, analyzing,, and discussing each of the numerous specifications in opposition to the discharge, and the testimony in relation thereto, reached the conclusion that all of the specifications except 5(a), 5(b), 6, 9 (a) and 10 should be dismissed. These five he sustained, and upon this action his recommendation that the discharge be denied rests.

- Specification No. 10 relates to the false testimony of the bankrupt given upon an examination of him with reference to whether or not he had on hand the sum of, to wit, $500 on the day upon which his petition in bankruptcy was filed or-shortly thereafter.

The record clearly supports the finding of the referee that the bankrupt did testify falsely about this matter, but it is claimed on his behalf that, since the referee later found that though he did have the money it was not money belonging to the estate, the testimony, though false, was not about a fact material to -the bankruptcy, and cannot.be made the basis of a denial of the discharge.

I do not agree with the bankrupt’s contention in this regard. The referee has fully set out the authorities which make it clear that this was a matter about which the bankrupt had testified-fully and untruthfully, and that, whether or not the investigation developed anything of material benefit to the creditors, it was a material investigation, false testimony upon which disentitles the bankrupt to a discharge. Ulmer v. U. S. (C. C. A.) 219 F. 641; In re Conroy (D. C.) 134 F. 764; In re Slocum (C. C. A.) 22 F.(2d) 282; In re Goldman (C. C. A.) 37 F.(2d) 97.

The other matters upon which the referee finds -against the bankrupt have to do with the bankrupt’s failure to list in his schedules or deliver to the receiver or trustee, or to account for -the sum of money in excess of $50 and less than $100 which he had on 'hand at the time his schedules in bankruptcy were prepared.

The facts are admitted that he did have it; that he did not schedule it; that he had never paid it over to the trustee, nor, except upon examination and inquiry for the purpose of developing, did he disclose the facts. He admits this, but defends on the ground, as stated in the brief of his counsel, that he acted as he did under the advice of counsel, and therefore could not be guilty of fraudulent concealment.

As to that $90, the evidence on the first examination is as follows:

“In the morning I went up to Mr. Kob-erts’ office, I had ninety and some odd dollars in my pocket. I believe I gave him $30 or $40 for the court and I got some gas and some more items. When I got through before I got to drinking I had close to $30 in my pocket. When I closed my business I had $90. I gave $30 to the court spent a few more dollars had some at home, bought a little liquor and gave my wife $25 or $30.”

Nothing was then said about'this having been done upon advice of counsel.

On the hearing for discharge, however, his counsel testified:

“I asked him if he had any money in cash on hand, and he said he had a little, but did not have anything to live on. He had to give his wife some money. He said he had about $90 but did not have anything to buy groceries with or any way to live, and I told him to give $30 for filing fees, and keep the balance, and if that constituted a false oath, it is my mistake and not his.”

It is true enough that advice of counsel that certain property does not in fact belong to the bankrupt and need not therefore be scheduled with his property when given upon a full and fair statement of fact is a defense to a charge of fraudulent concealment. In re Merritt (C. C. A.) 28 F.(2d) 679. It is also true that advice of counsel on a “plain, palpable and transparent fact” (In re Breitling [C. C. A.] 133 F. 146) that is, as here, that property which he owns without dispute or question does not have to be scheduled, is not a defense (In re Merritt [C. C. A.] 28 F.(2d) 679; Sinclair v. Butt [C. C. A.] 284 F. 568).

It is true that the amount involved in this specification is small; nor is this a ease like Grafton v. Meikleham (C. C. A.) 246 F. 737, where counsel and bankrupt colluded to conceal the small amount involved.

While the discharge of an honest bankrupt who has fully and fairly complied with all of the requirements of the statute is one of the prime objects of bankruptcy, the right to discharge does not flow from the fact of adjudication alone, but from that fact coupled with compliance with all of the essential requirements of the Bankruptcy Act (11 USCA). In re Goldman (C. C. A.) 37 F.(2d) 97. One of these prime requisites is that it shall appear that the bankrupt has made an honest and faithful effort to comply, and where the question of discharge vel non turns upon whether testimony has been fraudulently given or concealment or failure to disclose have been willful and fraudulent, the question of the intent with which the statements were made or the acts were done is of the essence of the inquiry. In such ease, tlie demeanor of the bankrupt in the course of the examination, the manner in. which he testifies, as much as the things which he says, are the important criteria. In such case, the referee, as special master, hearing the bankrupt’s testimony in the various examinations, is in a better position to determine the question of falsity than is the district judge from the printed record. In re Slocum (C. C. A.) 22 F.(2d) 282, 284.

In view of this undoubted advantage-which -the master had in determining the question of motive and intent of the bankrupt, which is the material one here, and in view of the careful and painstaking way in which the report of the master has been prepared, for this court, because of the smallness of the amounts involved, to refuse to follow the master’s finding, where there is no dispute about the facts, and the only question is as to intent, would result in putting a premium on plainly proven though small violations of the Bankruptcy Law, which the statute declares deprives the bankrupt of his discharge.

The findings of the referee are therefore adopted, and his recommendation approved. The bankrupt’s discharge will he denied.


text:
    CORN EXCHANGE BANK v. UNITED STATES.
    District Court, S. D. New York.
    July 13, 1931.
    Laughlin, Gerard, Bowers & Halpin, of New York City (Miss Alice B. Baldridge, of New York City, of counsel), for plaintiff.
    George Z. Medalie, U. S. Atty., of New York City (Walter H. Sehulman, Asst. U. S. Atty., of New York City, and C. M. Charest,, Gen. Counsel, Bureau of Internal Revenue, and Frederick W, Dewart, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for the United States.
   WOOLSEY, District Judge.

I grant the plaintiff’s motion in so far as it requests that the interest at 6 per cent, per annum on the agreed sum of $5,382.41, run from the 1st day of December, 1919, but I do not grant its motion .that it be allowed the fees paid herein to the clerk as costs.

I. This action, filed July 7, 1925, was brought by the plaintiff for a recovery of an alleged overassessment of its 1918 income taxes made during the year 1924.

The ease was tried in this court before Judge Grubb, and was dismissed on July 31, 1928. On plaintiff’s appeal, the Circuit Court of Appeals reversed this judgment and ordered a new trial. Corn Exchange Bank v. United States, 37 F.(2d) 34. The mandate was dated January 22, 1930, and an appropriate order of this court was entered thereon February 17, 1930.

After negotiation, it has been finally agreed that judgment may be entered for the-plaintiff herein without a new trial in the-principal sum of $5,382.41, with interest.

The only matter now in dispute, is the date-from which that interest should run.

II. I think that the facts in this ease-differentiate it from any of the cases cited, or any others I have had the opportunity to find, in the available time to me. Briefly stated the situation is this:

On its 1917 tax return, the plaintiff fixed its taxes at $51,026.80.

On an office audit by the Income Tax Department of the plaintiff’s income for 1917,. an additional assessment was made against, the plaintiff in the sum of $13,5-28.46, making a total tax of $64,555.46. This additional; assessment was paid in invitum on December 1, 1919.

On subsequent refund claim the plaintiff’s-taxes- for 1917 were finally fixed in 1924 at $52,524.65. Thus it was established that the-additional assessment resulting from the office audit above mentioned was a wrongful overassessment in the sum of $12,030.81, being the difference between the tax of $64,-555.46 as first assessed and the corrected assessment of $52,524.65.

The plaintiff, therefore, became entitled to-a refund or a credit of $12,030.81, with such interest as the Revenue Act then in force-provided in such circumstances.

Thereafter in 1924, this amount of $12,-030.81 so due to the plaintiff taxpayer was-adjusted as follows:

$3,306.75 was first refunded, by ebeek, and later $2,459.03 also. The balance of the $12,-030.81, however, namely, $6,265.03, was credited on March 29,1924, to the plaintiff as payment of an additional assessment against its 1918 income taxes, which has now been held to have been erroneous to the extent of $5,382.40.

III. Passing from background details to their results we have, therefore, this situation:

On its 1917 income tax the plaintiff was overassessed the sum of $12,030.81, which it paid to the government on December 1, 1919, in invitum, as part of a larger sum.

On its 1918 income tax the plaintiff was overassessed, according to the opinion of the Circuit Court of Appeals herein, followed by the present agreement of the parties, in the sum of $5,382.41. This sum, as above noted, was paid by the credit allowed to the plaintiff on March 29,1924.

Consequently, we have here as the ultimate facts:

1. An overassessment of the plaintiff’s income taxes for 1917, amounting to $12,030.-81, paid on December 1,1919.

2. The use on March 29,1924, of part of that overassessment of 1917 as a credit to pay an overassessment on the plaintiff’s 1918 income tax.

3. Thus, by two successive overassess-ments, the first admitted and the second now judicially found, the plaintiff has been wrongly kept out of its money since it paid its first overassessment on December 1, 1919.

IV. If the plaintiff had been guilty of an underpayment of his income tax, interest would have run against it from the due date of the taxes. Ford Motor Co. v. Dexter and Carpenter (D. C.) 51 F.(2d) 258, decided June 24, 1931, and the cases there cited.

On March 29, 1924, the government had confessedly been overpaid $12,030.81, and interest must have been payable thereon to the taxpayer at 6 per cent, per annum from December 1, 1919, unless there was a provision precluding such interest in the Revenue Act of 1921 (42 Stat. 227), then the governing statute in such matters.

“Interest” is the damages allowed for failure to pay money due or for the retention, of money which should not be retained. The justice of the situation, therefore, requires that the interest on the principal sum of $5,382.41 should run from December 1, 1919, unless something has happened, to suspend its running.

The second of the two overassessments by the government, both of which were justicia-ble wrongs to the taxpayer, cannot surely be •allowed to stop the running of interest for the interval between the first overassessment and the payment by credit of the second over-assessment.

Yet that is, in effect, the contention of the government.

Such an unjust result must find its sanction in a statute, if anywhere, and I do not find a statutory support for 'it.

Y. On March 29,1924, when the government credited the principal sum against the plaintiff’s 1918 income taxes, the revenue statute in force was the act of 1921, which went into effect on its passage, November 23, 1921, 3:55 p. m. (see Revenue Act of 1921, § 1404, page 321), and remained in effect until the Revenue Act of 1924 went into effect on June 2, 1924 (43 Stat. 253).

Under the decisions of the United States Supreme Court, the statutory provision in force at the time of the allowance of refunds or credits determines how interest thereon should be computed. United States v. Boston Buick Co., 282 U. S. 476, 478, 51 S. Ct. 206, 75 L. Ed. 470; United States v. Magnolia Petroleum Co., 276 U. S. 160, 48 S. Ct. 236, 72 L. Ed. 509; Blair v. United States ex rel. Birkenstock, 271 U. S. 348, 46 S. Ct. 506, 79 L. Ed. 983.

Section 1324 of the Revenue Act of 1921 (42 Stat. 316) provides as follows:

“See. 1324. (a) That upon the allowance of a claim for the refund of or credit for internal revenue taxes paid, interest shall be allowed and paid upon the total amount of such refund or credit at the rate of one-half of 1 per centum per month to the date of such allowance, as follows: (1) If such amount was paid under a specific protest setting forth in detail the basis of and reasons for such protest, from the time when such tax was paid, or (2) if such amount was not paid under protest but pursuant to an additional assessment, from the time such additional assessment was paid, or (3) if no protest was made and the tax was not paid pursuant to an additional assessment, from six months after the date of filing of such claim for refund or credit. The term 'additional assessment’ as used in this section means a further assessment for a tax of the same character previously paid in part.
“(b) Section 177 of the Judicial Code is amended to read as follows:
'See. 177. No interest shall be allowed on any claim up to the time of the rendition of judgment by the Court of Claims, unless upon a contract expressly stipulating for the payment of interest, except that interest may loe allowed in any judgment of any court rendered after the passage of the Revenue Act of 1921 against the United States for any internal-revenue tax erroneously or illegally assessed or collected, or for any penalty collected without authority or any sum which was excessive or in any manner wrongfully collected, under the internal-revenue laws.’ ”

It does not seem to me, therefore, that section 614 of the Revenue Act of 1928 (26 USCA § 2614 and note) would govern the question of interest on overpayments, as the plaintiff contends, but that that question would be governed by section 1324 of the act of 1921, as above quoted.

So far as section 615(c) of the Act of 1928 (28 USCA § 284) is concerned, dealing with interest on judgments, that covers all judgments entered after the effective date of the act of 1928, because it amends the Judicial Code.

Section 615(a) of the Revenue Act of 1928, however, does not differ from section 1324 (b) of the act of 1921 in any respect which would affect my decision that interest on the principal sum of $5,382.41 should run from December 1, 1919, the date of the payment of the first overassessment by the plaintiff.

VI. My attention is not called to any provision of the law allowing costs against the United States in actions of this kind, and, consequently, I deny the part of the plaintiff’s motion requesting as costs the fees paid to the clerk.

VII. An order providing for judgment in the sum of $5,382.41, with interest at 6 per cent, per annum from the 1st day of December, 1919, may be submitted for signature on two days’ notice of settlement.


author: LINDLEY, District Judge.

text:
    ATCHISON, T. & S. F. RY. CO. et al. v. UNITED STATES et al.
    No. 10479.
    District Court, N. D. Illinois, E. D.
    July 8, 1931.

      Frederick H. Wood, of New York City, Walter McFarland and P. F. Gault, both of Chicago, Ill., Douglas F. Smith, of Omaha, Neb., H. H. Larimore, of St. Louis, Mo., J. N. Davis, of Chicago, Ill., A. B. Mason, of San Francisco, Cal., R. J. Hagman and M. L. Countryman, Jr., both of St. Paul, Minn., R. S. Outlaw and Leslie Craven, both of Chicago, Ill., Wm. D. Whitney, of New York City, and A. B. Enoch, of Chicago, Ill. (W. F. Dickinson, O. W. Dynes, R. Y. Fletcher, E. E. Mclnnis, and Bruce Scott, all of Chicago, Ill., of counsel), for petitioners.
    Dick Dixon and Frank A. Leffingwell, both of Dallas, Tex., for petitioners Terminal Grain Co., Morten Milling Co., Stanard-Til-ton Milling Co., and Universal Mills.
    James Stillwell, of Pittsburgh, Pa., Theodore Schmidt, of Chicago, Ill., M. B. Pierce, of New York City, H. S. Harr, of Cincinnati, Ohio, W. J. Stevenson, of Cleveland, Ohio, J. R. Connell, of-Mt. Carroll, Ill., and D. P. Connell, of Chicago, Ill., for intervening petitioners carriers in Eastern District.
    Elmer B. Collins, Sp. Asst, to Atty. Gen., John Lord O’Brian, Asst, to Atty. Gen., and George E. Q. Johnson, U. S. Atty., of Chicago, Ill., for the United States.
    Edward M. Reidy and H. L. Underwood, both of Washington, D. C. (Daniel W. Knowlton, of Washington, D. C., of counsel), for defendant Interstate Commerce Commission.
    E. H. Hatcher, of - Topeka, Kan., and C. W. Steiger, of Eldorado, Kan., for intervening defendant Publie Service Commission for State of Kansas.
    C. A. Sorensen and Hugh La Master, both of Lincoln, Neb., for intervening defendant Nebraska State Railway Commission.
    Harrison A. Bronson, of Grand Forks, N. D. , for intervening defendant State of North Dakota.
    Ralph Merriam, of Chicago, Ill., for intervening defendant Board of Trade of' Kansas City, Mo.
    D. D. McDonald, of Jefferson City, Mo., Francis Silver, of Helena, Mont., James Morris, of Bismarck, N. D., Paul A. Walker, of Oklahoma City, Okl., Herman L. Bode, of Pierre, S. D., and Clyde S. Bailey and John E. Benton, both of Washington, D. C., for intervening defendants Corporation Commission of Arizona, Publie Utilities Commission of State of Colorado, Publie Utilities Commission of State of Idaho, Publie Service Commission of Missouri, Board of Railroad Commissioners of State of Montana, Public Service Commission of Nevada, New Mexico State Corporation Commission, Board of Railroad Commissioners of North Dakota, Corporation Commission of Oklahoma, Public Utility Commissioner of Oregon, Board of Railroad Commissioners of State of South Dakota, Publie Service Commission of State of Wyoming, and Arkansas Railroad Commission.

      George E. Q. Johnson, of Chicago, Ill., for the United States.
    Before SPARKS, Circuit Judge, and LINDLEY and WOODWARD, District Judges.
   LINDLEY, District Judge.

Plaintiffs, carriers in the Western district, seek to enjoin, pending final hearing of this cause, an-order of the Interstate Commerce Commission entered July 1, 1930, and one of supplemental character entered April 10, 1931, in a proceeding, instituted by the Commission of its own motion, involving an investigation of the rate structure relating to grain and grain products within said district and for export. The proceedings were part of a general inquiry into and examination of the rate structure of all carriers subject to the Interstate Commerce Act (49 USCA § 1 et seq.), instituted in 1925 pursuant to the direction of Congress in the Hoeh-Smith Resolution (43 Stat. 801). In the investigation there were consolidated with the branch here concerned various complaints and other proceedings involving related subjects.

In its report the Commission stated that the question presented is whether, “under present conditions, the rates on grain and grain products throughout the western district are reasonable and just and are properly related to each other and to the rates on other traffic. The answer must take into account not only comparisons of distance, transportation conditions, and ton-mile and car-mile earnings on grain and other commodities, but also whether the general level of rates on all traffic as a whole is sufficiently high to accord to the carriers the rate of return contemplated by law, including section 15a of the interstate commerce act, which we construe to permit, but not to guarantee, the carriers to earn 5.75 per cent on the fair value of the property devoted to the transportation service,” and that the “record requires a general survey of the rates on grain and grain products throughout the western district from the standpoint not only of cost, but of general transportation conditions as well. The relation of rates, as well as the general level, is within the scope of the investigation.”

The Commission found that the existing rates were unreasonable and in many respects preferential or prejudicial and that certain .practices on the part of the carriers were improper and resulted in undue injury to the railroads and to other interested parties. Consequently it directed that the carriers desist from an enforcement of rates upon grain in excess of those therewith prescribed and from certain practices not in accord with the report and that they establish the prescribed rates on or before October 1, 1930, a date extended by the second order to June 1, 1931. Petitions for rehearing were denied. The present suit to set aside the orders followed, and we have presented now the motion for temporary injunction made therein.

We are not concerned with the wisdom or expediency of the order; nor may we substitute our judgment for that of the Commission. The latter is charged with the administrative duty of determining whether rates -and practices are reasonable, prejudicial, or preferential, and its orders entered in such capacity are conclusive unless there is lack of substantial evidence to support them or unless they are beyond the scope of the Commission’s power or invalid because of other error of law. Central R. R. Co. v. U. S., 257 U. S. 247, 42 S. Ct. 80, 66 L. Ed. 217; I. C. C. v. I. C. R. R., 215 U. S. 452, 30 S. Ct. 155, 54 L. Ed. 280 ; Skinner, etc., Corp. v. U. S., 249 U. S. 557, 39 S. Ct. 375, 63 L. Ed. 772; Assigned Car Cases, 274 U. S. 564, 47 S. Ct. 727, 71 L. Ed. 1204; U. S. v. New River Co., 265 U. S. 533, 44 S. Ct. 610, 68 L. Ed. 1165. In view of the absence of the evidence heard by the Commission, therefore, there is presented no question as to the sufficiency thereof to support the findings. Spiller v. A., T. & S. F. Ry. Co., 253 U. S. 117, 40 S. Ct. 466, 64 L. Ed. 810; La. & P. B. Ry. Co. v. U. S., 257 U. S. 114, 42 S. Ct. 25, 66 L. Ed. 156. There is left to our consideration only such legal questions as arise upon the face of the report, the order, and the pleadings herein.

Sections 1 (5) and 3 (1) of the Interstate Commerce Act, 49 USCA §§ 1(5), 3(1) direct that all transportation charges shall be reasonable and just, and forbid unjust, unreasonable, discriminatory, preferential, and prejudicial rates and practices and denominates them as unlawful. Section 15 (1), 49 USCA § 15(1) grants to the Commission power to determine whether any rates are unlawful in the sense of that 'word as used in sections 1 (5) and 3 (1); to determine what 'charges, classification, and practices will be fair, just, and reasonable; to order that carriers shall desist from unlawful charges; and to establish and enforce those found to be in accordance with the act.

Section 15a (2) and (3), 49 USCA § 15a (2, 3) provides that rates shall be such that the returns therefrom, under honest, efficient, and economical management and maintenance, will be “as nearly as may be” a fair return upon the aggregate value of the property used in tbe service; that the Commission shall have reasonable latitude to modify any particular unjust or unreasonable rate; that it shall publish the percentage considered by it to furnish the aforesaid fair return ; and that in such determination it shall give consideration, “among other things,” to the transportation needs of the country and the necessity of enlarging carrier facilities to provide an adequate transportation. The percentage heretofore found to furnish the desired return is 5%.

The Hoch-Smith Resolution (43 Stat. 801) directed the Commission to make a thorough investigation' of the carriers’ rate structure in order to determine whether then existing rates and practices were unlawful; to make, “in accordance with law,” such changes and redistributions as found necessary to correct defects found to exist; to consider, in its proceedings, the comparative commodity market levels and the maintenance of an adequate system; from time to time as expeditiously as possible to make such decisions as it found appropriate upon the record then made and to effect “with the least practicable delay” such lawful charges as will promote the freedom of movement of farm products.

The Commission devoted 261 days to ¡the hearing of the part of the general investigation here involved, considering testimony covering 53,000 pages and 2,100 exhibits. No part of that evidence is before the court. The Commission found that the average “present rates” on grain and grain products differ “not only in general territories but in different localities in the same general territory”; that such particular rates vary between a range of 57 to 149 per cent, of an accepted standard; that many rates are too low, others too high, and relative rates not in entire accord with transportation conditions; that horizontal treatment of existing rates would perpetuate these inconsistencies; and that some rates should be reduced, some increased, and some left unchanged.

The Commission found that the rates on grain and its products are unreasonable, unduly preferential, and prejudicial to the extent that they differ from the schedule ordered established; that transit practices are not uniform, but are unreasonable and preferential, result in discrimination, and should be restricted to two free stops; and that shippers should pay for additional stops at the rate of 2 cents per hundred pounds. Various specific findings as to transit conditions were included in the report. One of the Commissioners stated that the approximate cost of the present system of free transits to the railroads in the territory under consideration is $30,000,000 per year.

If we accept the statement of the Commission itself, it proceeded upon the assumption that by the resolution aforesaid it was its duty to undertake the tremendous task of reconsideration of the entire rate structure and traffic practice of the country, and with the aid of the parties compiled a record which presented a complete view of grain rates and traffic practices in relation thereto in the Western district, which supplied the facts necessary to an intelligent consideration and revision thereof. Without discussing the many details of the report, it seems obvious from our examination of same that the Commission was attempting to exercise its administrative functions in good faith under the law, upon voluminous evidence submitted. And, as suggested, in the absence of such evidence, we must assume that it was sufficient to sustain the finding that rates upon grain and grain products are unjust and unreasonable and traffic practices in relation thereto preferential and discriminatory.

The report includes a finding that plaintiffs are not earning the percentage heretofore published as sufficient to sustain an adequate transportation. Instead of 5% per cent., the carriers in the Western district have earned since 1921 not more than 4.45 per cent, (as in 1926) and as little as 3.12 per cent, (as in 1921). The earning for 1927 was 3.92 percent. In a recent report the Commission remarked that “the railroads have never been able, since 1920, to obtain the aggregate earnings contemplated by section 15a, and they are faced with continually increasing competition from other forms of transportation.”

Plaintiffs contend that the Commission is without jurisdiction to establish rates upon grain which it claims will deprive it of many millions of dollars in revenue when the return of 5% per cent, is not being earned; that section 15a puts upon the Commission the duty of initiating such rates as “will, as nearly as may be” earn such return; that “will” implies not mere permission but insures, “so far as possible, without direct guaranty,” the statutory fair return; and that the Commission treated the statutory provisions as granting to it mere permission, and thereby committed error in failing to follow the legislative mandate.

Even though we were to accept the proposition that the purpose of the statute was to furnish, so far as possible, an insurance of such rates as will furnish the statutory return, we would still be confronted with the fact- that though the Commission discussed and considered that the return is below what it believed to be a fair one, yet, in view of other evidence, it found the particular rates and practices unreasonable, preferential, and prejudicial; that it was dealing with only one branch of the rate structure; and that it arrived at its conclusion as to the specific rates and practices involved after its stated consideration of all evidence bearing upon the questions affecting the rates. We are therefore without right to conclude that the Commission deliberately ignored the subject of adequate return. We must assume that the evidence as a whole was sufficient to sustain the finding.

Plaintiff’s contention in effect is that the Commission is without power to modify existing particular rates, admittedly not producing a fair return, so as to warrant a reduction in revenue. We do not so construe the act. Though upon a nation-wide revision of rate structure as to all commodities the law may wisely and properly require that such structure must be so built in all its details as eventually to furnish a fair return, d. e., such a return as will support an adequate transportation system, it does not follow in our opinion, that, in a proceeding involving the rate structure of only certain commodities, the Commission may not reduce such rates on such commodities as it finds to be unlawful, even though the present return is not a fair one. Section 15a (2) seems to warrant such action as to particular rates, assuming always that the evidence supports the finding of unlawfulness, and the Supreme Court seems so to hold.

Thus in Dayton-Goose Creek Ry. Co. v. U. S., 263 U. S. 456, 44 S. Ct. 169, 173, 68 L. Ed. 388, 33 A. L. R. 472:

“The statute does not require that the net return from all the rates shall affect the reasonableness of a particular rate or a class of rates. In such an inquiry, the Commission may have regard to the service done, its intrinsic cost, or a comparison of it with other rates, and need not consider the total net return at all. Paragraph 17 of section 15a makes this clear. * * * Where the reasonableness of one rate or a class of rates is in issue, the total operating profit of the railroad or public utility is of little use in reaching a conclusion. This is shown by the words of Mr. Justice Lamar, speaking for the court, in Interstate Commerce Commission v. Union Pacific R. R. Co. (page 549 of 222 U. S., 32 S. Ct. 108, 111, 56 L. Ed. 308):
“ ‘Where the rates as a whole are under consideration, there is a possibility of deciding, with more or less certainty, whether the total earnings afford a reasonable return. But whether the carrier earned dividends or not sheds little light on the question as to whether the rate on a particular article is reasonable. Eor, if the carrier’s total income enables it to declare a dividend, that would not justify an order requiring it to haul one class of goods for nothing, or for less than a reasonable rate. On the other hand, if the carrier earned no dividend, it would not have warranted an order fixing an unreasonably high rate on such article.’ ”

If this language be obiter dictum, as insisted by plaintiffs, we shall leave announcement to that effect to the Supreme Court.

Plaintiffs assert that in reaching its conclusions the Commission was guided by standards other than those of the law, in other words, by the provisions of the Hoeh-Smith Resolution of Congress (43 Stat. 801), which directed the Commission, in view of the agricultural depression, to effect such changes in the rate structure as will promote freedom of movement of farm products at the lowest possible rate compatible with the maintenance of adequate transportation service. It is plaintiff’s theory that the Commission construed the resolution as placing agricultural products in a “most favored” class and justifying reduction of rates thereon, even though the same were already reasonable, and as requiring it to set up a zone of reasonableness and to establish such rates at the lowest possible point of said zone.

Were we able to conclude from what is before us that the plaintiffs are correct in assuming that the Commission adopted a standard other than that created by law, we would necessarily be impelled to enjoin the order, for no mandate of the Commission based upon a mistake of law or founded upon standards other than those of the Interstate Commerce law can be allowed to stand. I. C. C. v. N. P. R. R. Co., 222 U. S. 541, 32 S. Ct. 108, 56 L. Ed. 308; I. C. C. v. I. C. R. R. Co., 215 U. S. 452, 30 S. Ct. 155, 54 L. Ed. 280. And in Ann Arbor R. R. Co. v. U. S., 281 U. S. 658, 50 S. Ct. 444, 446, 74 L. Ed. 1098, the Supreme Court pointed out that the resolution “does not purport to make any change in the existing law, but on the contrary requires that that law be given effect. Nor does it purport to make unlawful any rate which under the existing law is a lawful rate, but on the contrary leaves the validity of the rate to be tested by that law.” In that ease the court found that the Commission -had by its construction, been led astray and guided by an improper construction of the resolution and set aside the order.

But we find here no evidence that the Commission was so misled. The ease last cited was decided prior to the entry of the order, and the Commission said concerning the same: “The Supreme Court of the United States recently interpreted the HochSmith resolution as setting up no standard of reasonableness of rate level or relation other than that already provided by the interstate commerce act. Ann Arbor Railroad Company v. United States, 281 U. S. 658 [50 S. Ct. 444, 74 L. Ed. 1098], decided June 2, 1930. The findings herein are under the provisions of the interstate commerce act.” This language, adopted unanimously by the eleven members, is definite notice to the parties that the Commission had no misconception as to its duty; that, if it made any mistake, such was one of fact, with which we are not concerned.

Plaintiffs contend further that the language of the concurring opinions of certain members of the Commission clearly sustain its contention that the order'was based upon the Hoch-Smith resolution in a manner condemned by the Supreme Court in the Ann Arbor Case. We do not understand that the utterance of individual members in a separate opinion can be utilized to invalidate the report of the Commission but that such separate statements may be read in connection with the expressions of the report and its expressed or tacit admissions, in order to determine to just what the Commission gave consideration. But here we are met with the Unconditional statement in the report that the Commission had in contemplation the holding of the Supreme Court in the Ann Arbor Case and that it was following the teaching thereof by making its findings under the law instead of under any alleged wrongful standard of the resolution. Furthermore, this statement, adopted by the complete Commission, is effective refutation of plaintiffs’ contention that certain individual members’ statements, alleged to be indicative of a desire to adopt a standard other than the lawful one, went unchallenged.

When we consider the expressions of the concurring commissioners, we find no convincing evidence therein that the members put upon the Hoch-Smith Resolution any construction other than that held by the Supreme Court to be authorized. When one of them said that the presented rates “lie within the zone of reasonableness but are the lowest rates on this traffic which can be lawfully presented,” we conclude only that he evidently believed that the rates were “lawfully” prescribed as defined in the Ann Arbor Case, and that his “zone of reasonableness” must have been that mentioned by the Supreme Court in Am. Express Co. v. S. D., 244 U. S. 617, 37 S. Ct. 656, 660, 61 L. Ed. 1352, where, in discussing two rates, it said: “Both rates may lie within the zone of reasonableness and yet involve unjust discrimination.” The statement of another Commissioner construed by plaintiffs to mean that in voting for the prescribed rates, he sought “to relieve the condition of agriculture,” cannot in the face of the report be interpreted as intimating that he meant other than legal relief.' Nor do we find convincing evidence in the other concurring opinions that the Commission or its individual members did not, as they state in the report, make their findings in pursuance of and in compliance with the Interstate Commerce Law.

It is contended that the finding whieh the report contains that the present rates are unreasonable to the extent that they exceed those prescribed is not sufficient to support the order. If we were able to determine satisfactorily to ourselves that the Commission deemed the rates unreasonable under the joint resolution, but not under the provisions of the Interstate Commerce Act, as the Supreme Court found the case to be in Ann Arbor R. R. Co. v. U. S., 281 U. S. 658, 50 S. Ct. 444, 74 L. Ed. 1098, we would necessarily be impelled to enjoin the order, for, as determined by the decision last mentioned, the Commission may not, in determining the reasonableness or unreasonableness of any rate, “entertain considerations not applicable under those sections 1 (5) and 3 (1) but believed by it to have been brought into the problem by the resolution.” But, in the absence of the record and an opportunity to examine the evidence before the Commission, wé are without power, in the absence of convincing evidence in the report itself, to say that the order was based upon the application of standards other than those established by the Interstate Commerce Act or upon a misconception of the Commission’s powers and duties. Despite the argument of counsel that it is apparent from the face of the report that the Commission followed instruction of the rest»-lution instead of that of the law, an examination of the report is not convincing of such conclusion. Nor can we ignore the direct statement of the Commission that “the findings herein are under the provisions of the interstate commerce act.” We are controlled in this connection bv the amendment to section 14 in 1906 (Hepburn Act [49 USCA § 14]) dispensing “with the necessity of formal findings of fact except in cases where damages (or reparation) are awarded.” Mfrs. Ry. Co. v. U. S., 246 U. S. 457, 38 S. Ct. 383, 392, 62 L. Ed. 831.

Complaint is made that almost two years intervened between the date of closing evidence and that of entry of the order, that the record had become stale and conditions changed for the worse for the carriers, and that it was therefore error of law for the Commission to deny petitions for rehearing setting up said changed conditions. Orders prescribing rates do not constitute rei adjudieata. The Commission’s administrative duty under the law in establishing reasonable rates and effecting desistanee from unreasonable rates and practices is a never ending one, and to that administrative body the carriers may at any time appeal for relief from harsh situations. The accumulation and consideration of 53,000 pages of testimony and the preparation of conclusions thereon is a gigantic task and one requiring much time. Quite naturally, conditions change during any such period. The world and its myriads of affairs are never the same two days in succession ; the history of to-day always differs from that of yesterday. If the Commission has no discretion to deny petitions for rehearing because of changed conditions, it would never arrive at a time when it might enter a lawful order. But the Commission has a discretion in the premises and even though we might believe it would have been wiser in the present ease to have granted a rehearing, we have no right to substitute our judgment in that respect for that of the statutory body. Nor, in view of the character of rate orders and the nature of the Commission’s duties, do we find any evidence of arbitrary abuse of discretion. The order is not res adjudicata, and the carriers have a right to relief whenever they can show that they are being unlawfully damaged. What may be the practical result of the new schedule, what the result of the general investigation of the universal rate schedule m'ay be, whether, after completion of the Commission’s tremendous task, the return to which the carriers are presumptively entitled may be realized or not, are questions for the future. If the answers are not satisfactory, the interested parties may appeal to the Commission and to the courts.

From what we have said and the findings of fact adopted, it follows that we do not deem the showing sufficient to warrant the allowance of the motion. Intervening petitions were filed herein, and certain other causes have been consolidated herewith, but nothing suggested as to the questions involved therein is sufficient to warrant interference with the Commission’s order by us.

The motion for a temporary injunction will he denied and the temporary restraining order heretofore entered dissolved.