author: PHILLIPS, Circuit Judge. KENNEDY, District Judge

text:
    HAVENER v. UNITED STATES.

    No. 239.
    Circuit Court of Appeals, Tenth Circuit.
    April 6, 1931.
    KENNEDY, District Judge, dissenting.

      James M. Johnson and Donald W. Johnson, both of Kansas City, Mo.,, for appellant.
    S. M. Brewster, U. S. Atty., and L. E. Wyman and Donald C. Little, Asst. U. S. Attys., all of Topeka, Kan.
    Before COTTERAL and PHILLIPS, Circuit Judges, and KENNEDY, District Judge.

      Rehearing denied June 1,1931.

   PHILLIPS, Circuit Judge.

Charles E. Havener was indicted, tried, convicted and sentenced for a violation of section 215 of the Criminal Code (section 338* title 18, USCA).

The indictment charged that defendant devised a scheme to defraud R.- G. Biles and to obtain certain money from Biles by means of false and fraudulent representations and promises, as follows:

“That he * * * would and did represent * * * that he had in his possession for sale certain valid * * * obligations of the Hunter Steel Company, a corporation, * * * which corporation the said * * * Havener represented to be conducted in a businesslike manner, and having good and well established business, and having assets of some $14,000,000.00, and by means of such representations the said * * * Havener would and did induce the said R. G. Biles * ~ * to pay to him * ® '* the sum of $2500.00 as consideration for two notes of the Hunter Steel Company, made payable to Arthur H. Hunter and endorsed on the hack by said * * * Havener, and at the same time delivered to the said R. G. Biles *' * * a note * * * purporting on its face to have been executed by the Colorado Utah Mines Holding Company by Charles E. Havener, president, and M. C. Havener, secretary, and being endorsed on the back by Charles E. Havener, J. W. Phares, and G. A. Swallow as trustees of the Colorado Utah Mines Holding Company, a trust estate. * * *
“Said * ■ Havener * * * further alleged that said note of the Colorado Utah Mines Holding Company was “ * * valid * * * and that the same would be paid when due; and said * * * Havener further alleged that said Hunter Steel Company notes * * * would be paid on their due date. * • *
“That after said * • * Havener should procure, as he did procure, the $2500.-00 of the monies of the said R. G. Biles * * * that he would, and did, represent to the said R. G. Biles * * * that said Hunter Steel Company had directed him to turn back to the Hunter Steel Company their notes and that the said Hunter Steel Company would return all contracts and notes calling delivery off which they desired to do without proceedings in court and for the reason that they could not handle Willard Iron property; the said * * * Havener having also represented * * * to * *■ * R. G. Biles * * * that said notes of the Hunter Steel Company had been received by the said * * * Havener as president of the Colorado Utah Mines Holding Company as a part of the consideration and assets which * * * Havener claimed belonged to the Colorado Utah Mines Holding Company.
“That * * * Havener as a further part of said scheme and artifice to defraud also alleged that as consideration for said R. G. Biles * * * returning to him the said notes of the Hunter Steel Company for $5000.00 each, and the said note of the Colorado Utah Mines Holding Company for $10,-000.00 he would, and did, give to the said R. G. Biles * * * his personal note in the amount of $10,000.00 on its face due August 12th, 1925, which he * * * represented was better * * * than the Hunter Steel Company notes * * * thereby representing and intending the said R. G. Biles * * * to understand and believe that said note of said * * * Havener would be paid when due on August 12th, 1925."

The indictment further charged that defendant knew at the time he made such representations that they were false and fraudulent in the following particulars: (1) That the Hunter Company notes were not given to defendant in consideration of the purchase-price of the Holding Company property, but had been delivered to defendant on a contract to sell for eighty per cent, of their face value. (2) That the Holding Company note had been canceled and recalled on or about January 9,1924. (3) That the Hunter Company, on January 15, 1925, had not terminated its contract with defendant to sell such Hunter Company notes. (4) That the defendant did not intend to pay his personal note for $10,000, on August 12, 1925, or at any other time.

The indictment further charged that the defendant, for the purpose of executing such scheme and artifice, caused a certain letter, contained in an envelope addressed to R. G. Biles, to he delivered to Biles through the post office at Hill City, Kansas; and set such letter out in full.

Such letter in part reads as follows:

“Hotel Angelus, Los Angeles, California, “January 15, 1925.
« * * • My personal note is enclosed in amount $10,000.00 due August 12, 1925, the same due date as Hunter Steel Company notes, which must be returned to Hunter Company in full cancellation of their purchase of our Willard Iron property, the final settlement reached in New York yesterday between Hunter Steel Company attorneys and our attorneys, and therefore, I have sent you and enclosed my own note for the $10,000 which is better anyway than Hunter Steel Company’s note with our Holding Company’s judgment note as security back of it.
“The telegram I received yesterday from the New York attorneys reads as follows:
“ ‘Hunter Steel Company ask you return back their notes and they will return all contracts and notes calling deal off which they desire to do without proceedings in court,’ and their reason is They Cannot Handle Willard Iron Property — as there is only one thing for us to do, namely, take back our property and undo all that has been done between the Hunter Steel Company and Colorado Utah Mines Holding Company — regardless of the fact that we are heavy losers in the whole transactions through loss of time as well as capital.
“Please return the two $5,000 Hunter Steel notes to me immediately — registered mail — in the enclosed stamped envelope which I have addressed for your use. * * *
“Charles E. Havener.”

After a verdict of guilty, counsel for defendant interposed a motion in arrest of judgment on the ground that the indictment failed to state facts sufficient to constitute an offense under the laws of the United States.

Counsel for defendant contend that the court erred in overruling the motion in arrest of judgment.

While the formation of a scheme or artifice to defraud is an essential element of the offense defined in section 215 of the Criminal Code, the gist of the offense is the use of the mails for the purpose of executing or attempting to execute such scheme, and it is, therefore, sufficient to charge the scheme with such particularity as will enable the accused to know what is intended and to apprise him of what he will be required to meet on the trial. Brady v. United States (C. C. A. 8) 24 F.(2d) 397-398; Horn v. United States (C. C. A. 8) 182 F. 721, 727; Brooks v. United States (C. C. A. 8) 146 F. 223, 227; Cochran v. United States (C. C. A. 8) 41 F. (2d) 193, 197.

The scheme need not be pleaded with all the certainty as to time, plaee and circumstances required in charging the gist of the offense. Brady v. United States, supra; Cochran v. United States, supra; Savage v. United States (C. C. A. 8) 270 F. 14, 18; Gardner v. United States (C. C. A. 8) 230 F. 575; McClendon v. United States (C. C. A. 8) 229 F. 523, 525; Brooks v. United States, supra; Chew v. United States (C. C. A. 8) 9 F.(2d) 348, 351; Mathews v. United States (C. C. A. 8) 15 F.(2d) 139, 143.

The substance of the charge with respect to the scheme is that the defendant, actuated with a fraudulent intent, devised a scheme to induce Biles to pay him $2,500 in exchange for the two notes of the Hunter Company and to thereafter induce Biles to exchange such Hunter Company notes for the worthless note of the defendant by means of the false and fraudulent representations alleged.

The indictment, while inartifieially drawn, charged the scheme with sufficient certainty to enable the defendant to know what was intended and to apprise him of what he would be required to meet on the trial. The use of the mails for the purpose of executing a scheme was aptly and properly charged. The indictment was not open to attack, especially after a verdict, by motion in arrest of judgment.

At the close of the evidence, counsel for defendant moved the court to instruct the jury to return a verdict of not guilty.

Counsel for the defendant contend that the proof did not establish (1) the allegations of fraud set forth in the indictment, and (2) that the defendant caused the letter, alleged in the indictment, to be delivered by mail, according to the direction thereon, for the purpose of executing such scheme to defraud.

R. G. Biles testified that he became acquainted with the defendant in 1920; that in 1920 and 1922 he purchased from the defendant beneficial certificates in the Holding Company for $3500 ; that in December, 1924, lie had a conversation, with him at Logan, Kansas, concerning certain notes of the Hunter Company; that on December 18, 1924, at Biles’ home in Hill City, Kansas, defendant show.ed Biles and his wife a prospectus and financial statement of the Hunter Company which stated it had total assets of twenty-six million dollars; that defendant exhibited two notes of the Hunter Company for five thousand dollars each, due August 12, 1925, and stated that they were good and would be paid when due; that they were of a total issue of two hundred and fifty thousand dollars, which the Hunter Company had delivered to the defendant in payment of property of the Holding Company; that the funds derived therefrom would go to the Holding Company; that the defendant.offered to give him the two Hunter Company notes of five thousand dollars each and a note of the Holding Company for ten thousand dollars and his personal note for forty thousand dollars in exchange for twenty-five hundred dollars in cash; that the defendant stated the' Holding Company note was good; that defendant also stated that such twenty-five hundred dollars in cash, within three years, would be worth three million dollars to defendant; that he paid the defendant five hundred dollars in cash, gave him a draft for two thousand dollars and received the two Hunter Company notes for five thousand dollars, and the Holding Company note for ten thousand dollars as collateral thereto.

He further testified that thereafter he received by registered mail, from the postmaster at Hill City, Kansas, the letter set out in the indictment; that there was enclosed in such letter a personal note of the defendant for the principal sum of ten thousand dollars, dated January 15, 1925, due August 12,1925, with interest from maturity at ten per cent.; that when he received such letter he returned the two Hunter Company notes and the Holding Company note to the defendant; that defendant visited him between May 15 and 20, 1927, and on such occasion he requested defendant to pay the ten thousand dollar note of January 15, 1925; that defendant told him “he could not pay it, that he didn’t have the money.”

J. W. Phares testified that he was a trustee of the Holding Company from the date of its organization until 1926; that an arrangement was tentatively entered into by. which the Hunter Company agreed to take over the assets of the Holding Company and to pay therefore twenty-five dollars for each outstanding share of the Holding Company; that thereupon and on January 9, 1924, the trustees adopted a resolution cancelling and rescinding all collateral notes of the company and directing the officers to recall such notes for cancellation; that such notes had been executed and delivered to the defendant to dispose of for the purpose of raising money to finance the Holding Company and were in the possession of defendant; that the board of trustees did not thereafter authorize any notes of the Holding Company to be issued; that the trustees of the Holding Company never authorized defendant to sell any of the notes of the Hunter Company as the property or assets of the Holding Company; and that he never knew of defendant transmitting to the Holding Company any money received from the sale of Hunter Company notes.

Upon cross-examination, he. testified that Mr. Hunter had told him in August, 1924, that he had issued some notes to defendant, who was selling them on a commission' “to help him finance until they (the Hunter Company) could complete the sale of their stock to take up” the purchase-price of the Holding Company’s property, and that such notes were to be sold" at not less than eighty per cent, of their face value.

The evidence established that defendant made the representations substantially as alleged in the indictment, and that they were false in the several particulars alleged,, except that it was not shown the Hunter Company had not terminated its contract with the defendant to sell such notes.

Where an indictment, based on section 215, supra, charges a number of false representations tending to prove the existence of a scheme, it is not necessary to prove all of the false representations charged if proof of a lesser number lays a sufficient foundation for a finding by the jury that the scheme in substance was in fact devised. Mathews v. United States (C. C. A. 8) 15 F.(2d) 139,144-5; Kaplan v. United States (C. C. A. 2) 18 F. (2d) 939; Nash v. United States, 229 U. S. 373, 33 S. Ct. 780, 57 L. Ed. 1232.

It may be that, on December 18,1924, defendant had not fully devised, in all its details, the ultimate scheme charged in the indictment, but he had, on January 15, 1925, when he mailed the letter of that date. No doubt the defendant fashioned the scheme, as he proceeded with the execution thereof, to meet the exigencies of the changing circumstances, but he had completed the ultimate scheme by which he purposed to defraud Biles before he used the mails in furtherance there»of. In other words, the proof shows that he started out with a definite purpose to defraud Biles; that he finally purposed to accomplish such result by the scheme charged in the indictment, and that, after having fully evolved such scheme, he used the mails for the purpose of executing the same. This, in our opinion, was sufficient.

We conclude that there was sufficient false representation proven to warrant the jury in finding that the defendant devised substantially the scheme alleged in the indictment.

The use of the mails in the furtherance of a scheme may be established by circumstantial evidence. Cochran v. United States (C. C. A.) 41 F.(2d) 193, 205; Krotkiewicz v. United States (C. C. A. 6) 19 F.(2d) 421; Levinson v. United States (C. C. A. 6) 5 F.(2d) 567; Baker v. United States (C. C. A. 6) 10 F.(2d) 60; Dysart v. United States (C. C. A. 5) 4 F.(2d) 765.

The letter was received by Biles by registered mail through the post office at Hill City, Kansas; it was addressed to Mr. and Mrs. R. G. Biles; it referred to the prior transaction between the defendant and Biles; it purported to have been written, by the defendant; and it enclosed a note purporting to have been executed by the defendant. Biles returned the Hunter Company notes and the Holding Company note to defendant. When Biles demanded payment from the defendant of the note forwarded with such letter, defendant did not deny that it was his note, but stated that he could not pay it because he did not have the money. This was a tacit admission that defendant had forwarded such note and letter through the United States mails. It is improbable that any one but defendant and Biles were sufficiently acquainted with the prior transaction to have written such a letter. These circumstances, in our judgment, warranted the jury in finding that the defendant forwarded the letter by registered mail, directed to Biles at Hill City, Kansas.

The judgment is affirmed.

KENNEDY, District Judge

(dissenting).

I agree that the indictment sets up an offense under the statute, however weird and unusual the alleged scheme to defraud may appear to be. I likewise agree that the proofs tending to support the use of the mails, although meager, are sufficient. I cannot, however, agree that the proofs purporting to support the alleged scheme to defraud are sufficient to sustain the judgment. *The alleged scheme to defraud set forth in the indictment is to the effect that the defendant, previous to the carrying out of the transactions, involved, would first have Biles take over the Hunter and Holding company notes together with that of the defendant and then induce Biles to exchange the Hunter notes for the personal note of the defendant which he (the defendant) did not intend to pay. All the elements above outlined are necessary to eon- ' stitute the scheme to defraud, else the indictment must fall. While there is proof that the defendant did certain aets which it may be conceded resulted in the loss of $2,500 to Biles; yet in my opinion there is,an utter lack of evidence which in any way tends to support the charge that, prior to the beginning of the transactions between Biles and the defendant, the defendant had in mind that portion of the alleged scheme to subsequently substitute his own note for' the Hunter notes in the hands of Biles. Nor do I find anything in the evidence which will permit a reasonable inference of this kind to be drawn. ■ On the other hand, the evidence tends to show, as I read it, that, after the Hunter deal fell through and it became desirable to return the Hunter notes, the defendant then and only then conceived the idea of substituting his own note for the purpose of getting the Hunter notes back. Therefore the proof would seem to fail in supporting an integral part of the charge set-forth in the indictment. Each essential element of the charge laid in an indictment must be proved beyond a reasonable doubt.

Nor in my opinion, does it do to say that that portion of the scheme to substitute the defendant’s note for the Hunter notes in the hands of Biles may have been devised later, for the reason that it would be a substantial variance from the charge laid in the indictment, and also for the reason that there is no proof tending to show that the Hunter notes sold to Biles by the defendant were not good and collectable at the time they were sold, but affirmative proof that the defendant had the right to dispose of them. The manner or method in which he was to account for the proceeds had nothing to do with their negotiability or with their validity as evidence of indebtedness in the hands of Biles. The first part of the alleged scheme to defraud by selling the Hunter notes to Biles, assuming as we must that these notes were valuable and that the defendant had the right to dispose of them, because there is in the record no evidence to the contrary, ivas not, standing alone, a scheme to defraud in any respect, and it takes the latter element of the alleged substitution in which alone the mails were used to constitute any crime whatever under the statute. Certainly the chief and substantial element of a scheme to defraud cannot be an afterthought.

For the reasons stated, I feel impelled to dissent from the conclusion of the majority.


source: Caselaw Access Project

author: LEWIS, Circuit Judge.

license: Public Domain

text:
    MANDLER et al. v. UNITED STATES.
    No. 219.
    Circuit Court of Appeals, Tenth Circuit.
    April 6, 1931.
    Paul Pinson, of Tulsa, Okl. (Walter L. Ransom, of Sapulpa, Okl., and D. H. Linebaugh, of Muskogee, Okl., on the brief), for appellants.
    John M. Goldesberry, U. S. Atty., of Tulsa, Okl.
    Before LEWIS, COTTERAL, and PHILLIPS, Circuit Judges.
   LEWIS, Circuit Judge.

Appellee brought this suit on behalf of Katie Grayson. Appellants, Mandler, Ransom and Tiger, defendants below, moved to dismiss the amended bill, which was overruled. They refused to plead further, elected to stand on their motion to dismiss, and the court at once- entered decree for plaintiff.

The amended bill alleged that Katie Grayson is an enrolled full blood Creek Indian, appellant’s ward, and the suit is in her behalf; that under the General Allotment Act of February 8, 1887 (24 Stat. 388), Nan-pe-chee Polecat, a Shawnee Indian of that blood was enrolled as an absentee Shawnee and there was allotted and patented to her a Shawnee allotment; that, thereafter, by virtue of the Act of June 28, 1898 (30 Stat. 495) the Dawes Commission, without knowledge of Nan-pe-ehee’s enrollment and allotment as an absentee Shawnee Indian and as a result of gross mistake of law and of fact, entered the name of Nanpe-ehee upon the Creek rolls, and pursuant to said enrollment there was allotted to her certain lands of the Creek Tribe; that, thereafter, patent was issued purporting to convey said lands to Nan-pe-ehee, but that before delivering said patent to her the Dawes Commission was advised and learned of its said mistake in erroneously placing Nanpe-ehee’s name upon the Creek rolls, and said patent or deed was never delivered; that Nan-pe-chee died in October, 1902, unmarried and intestate, leaving a son of tender years, to-wit, defendant Tiger, her sole heir, and the allotment of Creek lands to said Nan-pe-ehee was then dealt with as shown by exhibits attached to the bill; that the Dawes Commission, after discovering or being advised of its mistake of fact, caused the Secretary of the Interior to enter a certain order or judgment under date of April 11, 1904, striking the name of Nan-pe-chee from the Creek rolls and cancelling her allotment and patent. That, thereafter, the said lands that had been allotted to Nan-pe-chee were with other lands allotted to Katie Grayson, a full blood Creek Indian and enrolled as such, and a patent therefor was issued in her favor and delivered to her, and she has since been in possession. That the defendants claim some right, title or interest in and to the lands as shown by certain conveyances, some of which w.ere made by Tiger after he reached his majority and some by his grantees; also, that a decree had been entered by the district court of Creek county, Oklahoma, in a-suit wherein Mandler was plaintiff and Katie Grayson, et al., were defendants which purported to find and hold that Katie Grayson had no title to or interest in said land. Plaintiff below asked for decree striking the name Nan-pe-chee from the Creek rolls, that the allotment and patent issued to her pursuant to her enrollment be also cancelled and held for naught because of said mistake of law and fact, and that title be adjudged in Katie Grayson and quieted in her as against the claims of said defendants. The decree adjudged Katie Grayson owner in fee, that defendants had no title or interest and that they be enjoined from asserting any claim or title. The decree did not adjudge that the enrollment of Nan-pe-ehee nor the patent to her should be cancelled, nor her name stricken from the rolls. The decree in the state district court in Mandler’s suit against Katie Grayson does not bar the United States from prosecuting this suit as her guardian. United States v. Candelaria, 271 U. S. 432, 46 S. Ct. 561, 70 L. Ed. 1023.

Exhibits attached- to the bill and made a part thereof by reference consist of deeds or patents, one issued to Nan-pe-ehee and later one to Katie Grayson for the same land. The deed to Nan-pe-ehee executed by the principal chief of the Muskogee -Nation and approved by the Secretary of the Interior in May, 1903, was filed for record and recorded in that month in the office of the Dawes Commission. Across the record of! this deed has been put the word, “Cancelled,” also this, “Name stricken from roll. Departmental letter April 11,' 1904.” Also a marginal note on said page: “Cancelled by order of Department.” The deed to Katie Grayson was issued June 24, 1905. The other attached exhibits consist of correspondence between the .Dawes Commission, the Secretary of the Interior and the Commissioner of Indian Affairs. It began on February 25, 1903, and closed on April 30, 1904., The statements in that correspondence disclose that the Creek roll of Creek citizens by blood, containing the name of Nan-pe-chee, was approved by the Secretary of the Interior November 14, 1902, that Shawnee lands had been allotted to Nan-pe-ehee as an absentee Shawnee, that Nan-pe-ehee’s father, while the inquiry was being made about the claimed mistake, was found among the Creeks. He also had received a Shawnee allotment and thereafter a Creek allotment. He was requested to select which of the two he would retain and surrender the other, and after examining the two he chose his Shawnee allotment, but his daughter, Nan-pe-ehee, seems to have died at the age of twenty years before that investigation was made, while she was living among the Creeks. The Commissioner of Indian Affairs and the Dawes Commission requested the Secretary of the Interior to cancel the name of' Nan-pe-chee from the Creek roll, to cancel her allotment and her deed, and the Secretary by letter to the Commission directed that the cancellations be made. They were then cancelled.

As already observed, the amended bill ' alleges that the name of Nan-pe-ehee was placed on the Creek roll under the Curtis Act (30 Stat.-495), and the deed to her purported that her allotment was made under the Act of March 1, 1901 (31 Stat. 861), the Creek Agreement ratified by that nation May 25, 1901.

The Curtis Act (30 Stat. 495, 503) authorized and directed the Commission to make a' correct roll of the citizens by blood of the Creek Tribe, and provided that “the rolls so made, when approved by the Secretary of the Interior, shall be final. * * *” The Creek Agreement (31 Stat. 861) provided that all lands of said tribe should be allotted among its citizens by the Dawes Commission.

The amended bill asks for a decree striking the name of Nan-pe-ehee from the Creek rolls and cancelling her allotment certificate and patent or deed, but the decree did not touch those”subjects. It was confined to oth*er relief asked. It adjudged title in Katie Grayson, quieted that title in her and enjoined defendants from making claim to the land. In substance the controversy was one of title between Katie Grayson and Tiger and his grantees. They claimed title through Nan-pe-ehee. But the deed of the principal chief, executed April 14, 1903, on behalf of his nation and which purported to convey its right, interest and title in the land to Nanpe-chee, was not delivered. It did not pass title to her or to her heir. The Creek Agreement, section 23 (31 Stat. 868), so provides. It says:

“Any allottee accepting such deed shall be deemed to assent to the allotment and conveyance of all the lands of the tribe, as provided herein, and as a relinquishment of all his right, title, and interest in and to the same. * * *”

Assistant Attorney General Willis Van Devanter, now Associate Justice of the Supreme Court, so advised the Secretary of the Interior on April 24, 1902. He said:

“The acceptance of the deed by the allottee is to be taken as assent on his part of the allotment and sale of the lands of the tribe, as in said agreement provided, and as a relinquishment of all his right, «title and interest in and to the same, except in the proceeds of the land reserved from allotment. Not until such deed is executed, approved and accepted is the transaction completed and the title vested in-the allottee.”

Afterw.ard, on February 18, 1904, Secretary Hitcheoek in a written opinion in a contest of title between two Creek citizens, entitled Lobay Major v. Lou Thompson (I. T. D. 6752-1903), said this on the subject:

“The acceptance of the deed has the effect of the execution and delivery of a deed of release of the allottee’s interest in the other communal lands allotted to others of the tribe, like the voluntary deed in partition of one of several common owners. This makes acceptance of the deed a part of the transaction of partition or allotment of the communal property in severalty to the individual members of the communal owners. Such deed is therefore not the equivalent of a patent by the United States to public lands. The individual entryman has no interest in the mass of public lands, and has nothing therein to release. At or before the time of the final entry he renders the full consideration for the land he seeks to acquire, and his assent to the passing of legal title to him is complete at the instant of the final entry. The patent when issued relates to that date, though issued long afterwards. The issue and record of the patent vest legal title, whether it is delivered or not. (United States [ex rel. McBride] v. Schurz, 102 U. S. 378, [26 L. Ed. 167].) But the nature of Indian titles and effect given by the statute to the delivery and acceptance of the tribal deed make the doctrine of that case clearly inapplicable to allotment deeds.”

A deed in form like the one to Nan-peehee was issued to Katie Grayson on June 24, 1905, was delivered to her and she has been in continuous possession ever .since. The motion to dismiss admitted these allegations of fact. Katie Grayson, therefore, took and has held the legal title and possession since, and the greater equities are, in our opinion, also with her. The facts stated and admitted support the decree.

Decree affirmed.


author: DEWEY, District Judge.

text:
    NORTHERN NAV. CO. v. MINNESOTA ATLANTIC TRANSIT CO.
    No. 8904.
    Circuit Court of Appeals, Eighth Circuit.
    April 3, 1931.

      H. A. Carmichael, of Duluth, Minn. (Oscar Mitchell, James G. Nye, and Mitchell, Gillette & Carmichael, all of Duluth, Minn., on the brief), for appellant.
    Theodore C. Robinson, of Cleveland, Ohio (Roger W. Spencer, of Duluth, Minn., L. C. Hinslea, of Cleveland, Ohio, Spencer & Spencer, of Duluth, Minn., and Holding, Duncan & Leckie, of Cleveland, Ohio, on the brief), for appellee.
    Before STONE and BOOTH, Circuit Judges, and DEWEY, District Judge.
   DEWEY, District Judge.

On a bright summer afternoon in August the steamer King, a salt water type blunt-bowed freighter, 251 feet long, 43.5 feet beam, and with a draft of 16.5 feet forward and 17.5 feet aft, backed out of slip No. 3 on the north shore of the harbor at Duluth,' Minn., and headed for the Duluth ship canal about 3,000 feet to the east. At about the same time the steamer Noronic, a fine-lined passenger boat, 385 feet long, with a draft of 9 feet forward and 18 feet aft, backed out of slip No. 1, about 600 feet east of slip No. 3, and started for the same ship canal. This ship canal was 300 feet wide, 22.9 feet deep, and about 1,400 feet long, connecting the Duluth Harbor with Lake Superior. There were cement retaining walls on each side of the canal. At the west end of this canal the cement retaining walls continued as piers, but curved to the north and south to form an approach to the canal, and the width of the entrance at the extreme west end of the piers was some 500 feet. On the west end of the cement retaining walls and just before the walls continued as piers, or curved for the entrance, is an aerial bridge. At the time the boats arrived at this aerial bridge, the stem of the Noronie was ahead of the stem of the King; the latter lapping the port quarter of the Noronie some 75 to 100 feet. After the two boats had just passed the aerial bridge, their sterns were abreast, and the suction from the Noronie pulled the stem of the King towards the stem of the Noronie and caused the King to veer into the cement wall on its left or port side, inflicting considerable damage. The foregoing facts are the only facts in the record upon which there is no dispute. As to which steamer was in the lead after they had straightened out for the canal and as to the relative positions of the two vessels between that time and their arrival at the aerial bridge in the canal, there is an irreconcilable conflict ini the evidence, or an entire lack of evidence.

Both vessels .backed out of their respective slips, and in maneuvering backed to port, and each laid their respective courses for the ship canal. From the evidence they were in general traveling at about the same speed. The story as told by the witnesses for the Noronic is substantially as follows': That, as the Noronie was backing out of its slip, the King was observed backing out of its slip some 600 feet further west; that, as the Noronie straightened out and laid its course for the canal entrance, the King was finishing a like maneuver and was astern and to the starboard of the Noronic, later crossing the stem of the Noronie to port and at all times until entering the canal proper was astern of the Noronic; that at about the time they entered the pierheads of the canal the King endeavored to pass the Noronie, resulting in the positions of the two vessels as above recited and the subsequent damage to the King.

The story on behalf of the King, in substance, is: That the King had baeked out of its slip and was proceeding towards the canal going forward when the Noronie gave notice by a whistle that it was about to back out of its slip; the King then gave one short whistle indicating that it would pass to starboard of the Noronie and for the Noronie to remain in its berth; this signal was1 not answered by the Noronie, which at once proceeded to back out into the harbor, whereupon the King was required to stop its engines and wait while the Noronie backed across its bow, and that, as soon as the stem of the Noronie had cleared, the Bung proceeded, passing the Noronie on the latter’s port side while it was maneuvering to straighten out for the canal, and the King was in front of the Noronie at all times thereafter until just as it was reaching the pierheads of the canal the Noronie, coming up fast from behind, endeavored to pass it, resulting in the position of the vessels and the subsequent damage to the King as above narrated.

The Minnesota Atlantic Transit Company was the charterer of the King, and as libelant brought this action against the Noronie, owned by the Northern Navigation Company. The trial court found that the damage caused to the libelant’s steamer King was occasioned solely by the negligence of the respondent’s steamer Noronie and without any fault on the part of the said King, and rendered judgment in favor of the libelant for the entire damage sustained by the King.

As both vessels were outward bound and each started on its course at about the same time,-the stage was all set for a controversy to arise as to which one was entitled to go through the canal first. Evidence on behalf of the King was directed principally to the question of which one had the lead after the two vessels straightened out and fixed their courses for the canal, while the evidence for the Noronie was principally directed to the question of which vessel arrived first at the canal piers.

Three disinterested witnesses were standing on or near the doek from which the Noronic departed. Mr. Bronson, an officer in the United States Customs Service, was on the dock at the east side of the warehouse and about 50 feet inshore from the end of this dock. When the Noronie backed to the west he lost sight of it on account of the warehouse, and shortly thereafter saw the King go by, followed by the Noronie, which was about two ship lengths astern of the King. Practically the same story is told by the -two tugboat captains, Pinney and Ditzel. The witnesses for the Noronie may have been mistaken as to the position of the King with reference to the position of the Noronie during the period of the maneuvers caused by the several changes in the direction, as the Noronie was backing out and swinging to start on its course to the canal.

The trial court on this important question determined that, after the two ships had rounded to and were on defined courses, the King was the overtaken and the Noronie the overtaking vessel. There is no claim that the Noronie gave any signal to the King that it intended to pass the King, and- under this situation it is clear that the Noronie at no time had the right to pass the King without its permission, which, it is conceded, was never asked for or given.

The following rules govern the navigation of vessels in harbors and inland waters generally:

“When steam vessels are running in the same direction, and the vessel which is astern shall desire to pass on the right or starboard hand of the vessel ahead, she shall give one short blast of the steam whistle. * * * ” Rule VIII, section 203, title 33, U. S. C. (33 USCA § 203, Rule 8).
“Notwithstanding anything contained in these rules every vessel, overtaking any other, shall keep out of the way of the overtaken vessel.
“Every vessel coming up with another vessel from any direction more than two points abaft her beam, * * * shall be deemed to be an overtaking vessel; and no subsequent alteration of the bearing between the two vessels shall make the overtaking vessel a crossing vessel within the meaning of these rules, or relieve her of the duty of keeping clear of the overtaken vessel until she is finally past and clear. * * * ” Section 209, title 33, U. S. C. (33 USCA § 209).
“Where, by any of these rules, one of the two vessels is to keep out of the way, the other shall keep her course and speed.” Section 206, title 33, U. S. C. (33 USCA § 206).
“Every steam vessel which is directed by these rules to keep out of the way of another vessel shall, on approaching her, if necessary, slacken her speed or stop or reverse.” Section 208, title 33, U. S. C. (33 USCA § 208).
“In all channels less than five hundred feet in width, no steam- vessel shall pass another going in the same direction unless the steam vessel ahead be disabled o.r signify her willingness that the steam vessel astern shall pass, when the steam vessel astern may pass, subject, however, to the other rules applicable to such a situation. * * * ” Section 290, title 33, U. S. C. (33 ÜSCA § 290).
“In obeying and construing these rules due regard shall be had to all dangers of navigation and collision, and to any special circumstances which may render a departure from the above rules necessary in order to avoid immediate danger.” Section 212, title 33, U. S. C. (33 TTSCA § 212).

Agreeing with the facts as found by the trial court that the King was the overtaken vessel, the Noronic must be held entirely at fault for attempting to pass the King without its consent. The North Star (D. C.) 132 F. 145; The M. J. Rudolph (C. C. A.) 292 F. 740; The Kirnwood (D. C.) 201 F. 428, 429. The primary duty of the King, being the preferred vessel, was to maintain her course and keep her speed. The Delaware, 161 U. S. 459, 16 S. Ct. 516, 40 L. Ed. 771.

The trial court recites in its memorandum that “we know of the Noronic maneuvering at or near the end of the Northern Pacific Dock No. 4 (Slip No. 1), with the King nearby, and we have the two vessels entering the canal piers; but from the various witnesses who ought to have known the different positions of the vessels meantime, and have known what was going on, we have little information. In view of the time of the day, climatic conditions and the fact that there were no other vessels nearby to distract attention, this is at least surprising. * * * Neither crew had a right to navigate their respective vessels with any such disregard for the other. The two vessels were approaching the canal piers at the same time from slightly varying directions. There may be some doubt as to just which one crossed the line of the pierheads first. That is not necessarily controlling.”

These statements made by the trial court we confirm. Accepting the statements of the witnesses for the Noronic that at or about the time the two ships entered the pierheads most of the Noronic had passed the King, yet at that time an emergency had been created. The evidence discloses without dispute that, where a larger boat is passing a smaller one, such as the boats in this case, the effect of the suction, where the smaller boat is in advance, is to first draw it to the rear, and, when the stems are abreast, to draw the stem of the smaller boat to the stem of the larger.

That suction of an overtaking vessel is a frequent cause of collision, especially if she is larger than the overtaken vessel and the channel is narrow, is well known. The Mesaba (D. C.) 111 F. 215; The Aureole (C. C. A.) 113 F. 224; The North Star, supra; The Robert Fulton (C. C. A.) 10 F.(2d) 424. An overtaking vessel takes whatever risks attend her attempt to pass from whatever cause arising, except from the fault of the vessel ahead, The Mesaba, supra; and the burden was upon the Noronic as the overtaking vessel to show that the injury to the King was occasioned by no fault on her part but by some fault or neglect of duty on the part of the King, The Aureole, supra. It may be that the King could have saved itself by a proper maneuver as the danger was apparent, but no claim, is here made in the pleadings or in the evidence that the Bang was at fault in its navigation after the dan-' ger had both become apparent and real. It may then have been in danger of colliding with the Noronic or losing its headway and running into the piers. As we have tried to point out, the respondent does not make any claim of negligence on the part of the Bang in its navigation, except its endeavor to pass the Noronic within the confines of the canal. But finding, as we do, that the Noronic was at one time the burdened vessel and there being no evidence of any change in their relative positions, other than that the Noronic claimed that the Bong was at all times astern until they entered the pierheads, we must conclude that at or about the time of the entering of the pierheads the Noronic was passing the King and, if we consider, as we must, that it had crept up on and was passing, although it had not completely passed, the Kong as it entered the piers, it would still be the overtaking vessel endeavoring to pass the Bang within the piers, whieh was prohibited by the harbor pilot rules.

As we have heretofore shown, the testimony is noticeably lacking in giving the respective positions of the vessels from the time they left on their courses until they reached the piers. From the positions they held at the start, however, with the King in advance and both vessels having the same distance and traveling at about the same speed and arriving within the pierheads at about the same time, the conclusion is inevitable that the Noronic was at all times more than two points abaft the beam of the King except as she was passing the King. The appellant contends, however, that, even if the Bang was at one time the overtaken vessel, the situation and position of the two vessels changed before their arrival at the piers, and at that time they were approaching each other at right angles or obliquely so as to involve risk of collision, and that the vessels then came within the rule known as the “Starboard Hand Rule,” which permito the vessel on the starboard to have the right of way. That rule has to do with a situation distinctly stated in the rule “other than when one steamer is, overtaking another.” The statement by the trial court that the two vessels were approaching the canal piers on converging lines, or from slightly varying directions, is far from a holding that they were approaching each other obliquely so as to involve risk of collision and that their positions were other than one where one steamer was overtaking another.

By an unusual coincidence, photographs were taken of the two vessels as they passed under the aerial bridge. In the first one the King had just reached the aerial bridge and most of the Koranic had passed under it. In the second photograph they had both just passed the aerial bridge. In this short distance the photographs indicate that the King had crept up on the Koranic. The trial court found this to bel of small importance, as the King was then within the suction of the Koronie and was being carried along with it. The photographs also show the King at about the center of the canal, with the Koranic on its starboard side. These positions are subject to explanation, and we would agree with the trial court that, under the entire situation as presented by the evidence, they are of relatively small importance. It is beyond the pale of probability that, if the King was in the rear at the time the Koranic entered the piers, it would be so foolhardy as to endeavor to increase its speed and pass the Koronie in the narrow confines of the canal. Such action would result in disaster to the King and probably to the Koranic.

The testimony of the witnesses is in direct conflict, and no useful purpose will be served in setting out and discussing the evidence in detail. A greater number of witnesses appeared for the Koranic, but the weight of the evidence is not determined by the number of the witnesses. It is an established rule in admiralty that, when an appeal involves only questions of fact dependent .upon conflicting testimony, the decree of the District Judge who has an opportunity of seeing the witnesses will not be reversed unless the appellate court can clearly say that the decree was against the weight of the testimony. The City of Naples (C. C. A.) 69 F. 794, 796; Elphicke v. White Line Towing Co. (C. C. A.) 106 P. 945; Louisiana Excursion Co. v. Gidionsen (C. C. A.) 217 P. 751.

An assignment of error by appellant is that the District Court erred in allowing libelant’s witnesses to testify as to the movements of the two vessels in the harbor at Duluth prior to entering the piers of the ship canal; said testimony being inad■missible under the pleadings of this case. This assignment cannot be sustained for several reasons: First, the claimant did not object to the introduction of this evidence at the time the evidence was being introduced; second, the evidence was admissible as bearing upon the question of which of the two boats was passing the other as they entered the canal; and, third, from our holding above that the Koranic was the passing vessel, its action in so doing comes clearly within the charge of negligence that the Koranic negligently attempted to pass the King in this narrow and confined channel. The Koranic having violated the rules governing overtaking vessels, which in this case sufficiently accounts for the damage to the King, all doubt should be solved against her, and she cannot escape liability by suggesting the- possible fault of the King. The City of New York, 147 U. S. 72, 85, 13 S. Ct. 211, 37 L. Ed. 84; The Victory & The Plymothian, 168 U. S. 410, 423, 18 S. Ct. 149, 42 L. Ed. 519; Foster v. Merchants’ & Miners’ Transp. Co. (D. C). 134 P. 964, 969.

The decree of the district court appealed from is affirmed.


author: WOOLLEY, Circuit Judge.

text:
    THE JOSEPHINE. TEXAS CO. (SOUTH AMERICA), Limited, et al. v. CUMMINS et al.
    No. 4408.
    Circuit Court of Appeals, Third Circuit.
    April 6, 1931.

      Acker, Manning & Brown, of Philadelphia, Pa., and Bigham, Englar, Jones & Houston and Osear R. «Houston, all of New York City, for appellants.
    Howard M. Long, of Philadelphia, Pa., and Burlingham, Veeder, Fearey, Clark & Hupper, of New York City (Roscoe H. Hupper and William J. Dean, both of New York City, of counsel), for appellees.
    Before BUFFINGTON and WOOLLEY, Circuit Judges, and THOMPSON, District Judge.
   WOOLLEY, Circuit Judge.

The Schooner “Josephine,” having sailed from Port Arthur, Texas, arrived at Pernambuco, Brazil, her port of destination, long overdue with her cargo damaged by water taken aboard during heavy weather. The Texas Company, the ostensible owner of the cargo and party to the charter, filed a libel in rem for damages. Although The Texas Company (South America) Limited, an affiliated corporation, .intervened as the real party injured, we shall, for convenience, speak of the cargo owner as the libellant.

The case was tried on an issue of law arising from the owner’s warranty of the schooner’s seaworthiness and on a corresponding issue of fact. The District Court, finding her seaworthy, entered a decree dismissing the libel. The libellant appealed.

Before coming to the facts we pausé to make certain the issue raised by the pleadings and briefly to examine the applicable law.

The cargo owner avers in its libel that in December 1917 it entered into a charter party whereby the shipowner agreed to let and the libellant agreed to hire the schooner for transportation of petroleum products on a voyage between the ports stated; that early in April 1918, the libellant put aboard the schooner, then lying at Port Arthur, Texas, the agreed cargo in good order and condition; that on April 13 she sailed and after a voyage of four months reached her port of destination and delivered the cargo not in the good order and condition in which it was shipped but damaged through negligence of the schooner in respect to loading, stowage, custody and care, and through her unseaworthiness. As the issue raised by the libellant’s averment of negligence in loading, stowage, etc. was not separately pressed at the trial, the pertinent part of the schooner’s answer may be limited to the owner’s traverse of the libellant’s averment of her unseaworthiness and to his reply that he had used due diligence and ordinary care to make the schooner seaworthy in all respects and that at the time of sailing she was seaworthy and was properly manned, equipped and supplied for the voyage, and that any damage sustained by the cargo was not caused or contributed to by any fault on his part but was occasioned by perils of the sea which were excepted in the charter party and bill of lading.

Thus it is clear from the pleadings that the libellant relies for its law upon the owner’s express warranty in the charter party as to seaworthiness, namely, that the schooner was “tight, staunch, strong, and in every way fitted for the voyage.” The Edwin I. Morrison, 153 U. S. 199, 14 S. Ct. 823, 825, 38 L. Ed. 688; The Caledonia, 157 U. S. 124, 15 S. Ct. 537, 39 L. Ed. 644; The Lockport (D. C.) 197 F. 213. The owner however pleads the Harter Act (27 Stat. 445 [46 USCA §§ 190-195]) which makes no change in his duty under the warranty to furnish a seaworthy vessel, The Carib Prince, 170 U. S. 655, 18 S. Ct. 753, 42 L. Ed. 1181; The Cornelia (D. C.) 15 F.(2d) 245, but does modify liability to the extent that if he used diligence to see that the vessel was seaworthy he and his vessel are exempt from liability for loss arising from various causes — among them perils Of the sea. The Fort Gaines (D. C.) 21 F.(2d) 865; Id. (D. C.) 24 F.(2d) 849, affirmed Federal Forwarding Co. v. Lanasa (C. C. A.) 32 F.(2d) 154; The Agwimoon (D. C.) 24 F.(2d) 864; affirmed Atlantic Gulf & West Indies S. S. Lines v. Interocean Oil Co. (C. C. A.) 31 F.(2d) 1006, distinguished. The distinction between due diligence imposed upon an owner by the Harter Act and his relief from liability on the one hand and the owner’s duty and liability under his general warranty of seaworthiness on the other hand need not be discussed in this case because the evi denee bears equally upon the question of due diligence and the question of seaworthiness. And so evidently thought the proctors for the opposing parties, for both looked upon the schooner’s seaworthiness as the center of the ease and each voluntarily, and at once, assumed the burden of proving the opposite of the issue, respectively. This, however, does not relieve the respondent owner of his burden of proving the seaworthiness of his schooner, or of proving the exercise of due diligence in making her seaworthy as a prerequisite to availing himself of the liberality of the Harter Act, by showing that damage to the cargo arose from one of the exceptions in the charter party, The Folmina, 212 U. S. 354, 29 S. Ct. 363, 53 L. Ed. 546, 15 Ann. Cas. 748, which, as pleaded in this ease, is perils of the sea. The Cornelia, supra. Therefore the first question, (and, it may be, the only one), is that of the schooner’s seaworthiness under the warranty. In considering this question we shall follow the voyage through the evidence in order to determine the schooner’s condition at the start and her condition at sea in view of the perils she encountered.

As a warranty of seaworthiness must be construed as requiring the vessel to be seaworthy when she sails, Federal Forwarding Co. v. Lanasa (The Fort Gaines) 32 F.(2d) 154 (C. C. A.); Luckenbach v. McCahan Sugar Co., 248 U. S. 139, 150, 39 S. Ct. 53, 63 L. Ed. 170,1 A. L. R. 1522, the first question of fact bears on the condition of the schooner when she put to sea.

The “Josephine” was a wooden craft of about 940 gross tons, originally built with barkentine rigging but later changed to a four mast schooner. She was launched in 1896. Advancing in age, she was in 1916 stiffened by placing heavy top sister keelsons along her entire length and heavy tumbuckle rods athwartship. Nevertheless she was in 1917 hogged to the extent of fourteen inches.

From December 1915 to March 1918, a period of twenty-eight months, the “Josephine” was repaired four times at a cost of $17,500, of which $1,742 was expended upon her late in 1917. These facts and figures were used by the libellant as proof of the schooner’s bad condition and were relied upon by the owner as evidence of her good condition and of his diligence in making and keeping her seaworthy. To fortify its interpretation of these figures the libellant produced two witnesses who had surveyed the schooner in-1919 — nine months after she had sailed from Texas on the voyage in question and two months after she, had grounded on a later voyage. They testified that the condition of her hull was bad and gave their opinion that judging from what they saw when they examined her in January 1919 she must have "been, unseaworthy when she sailed on the voyage in April 1918. Against this opinion evidence by relation back to the critical time of departure there was direct evidence for the owner which showed that the schooner was under repairs at Mobile late in 1917 and after their completion she was reelassed by-the American Bureau of Shipping as A 1% for a six year period, the highest class for a schooner of her age; and there was testimony by the surveyor for the bureau that he examined the sehooner in the doek at Mobile and made a report on March 29,1918, specific as to details, and concluding: “Ship in good condition, this has been endorsed on her Class Certificate.” He also testified that at the time of his certificate she was seaworthy and in condition to take the cargo on the chartered voyage. Two weeks later she sailed.

True, the schooner was old, but age alone is not evidence of unseaworthiness. A wooden ship may be old and still be fit.

Finding the sehooner seaworthy at the inception of the voyage, the next question is, did she afterward become unseaworthy at a time and under circumstances which rendered the owner by due diligence capable of reconditioning her?

Sailing from Port Arthur, Texas, on April 13 the schooner’s troubles began the very next day when, encountering high winds in the Gulf of Mexico, she began to. lose her sails. The winds increased to hurricane force until by April 19 she had been practically stripped of her sails. She then put about and staggered back to the coast, arriving at Galveston on April 23, where she laid by awaiting new sails. There is no evidence that in this experience the hull of the sehooner had become unseaworthy. Indeed, no one seems to have thought anything about it; at least there is no evidence that she leaked during the gulf storm, or that loose planking or loose caulking was discovered after her return to port or that, except her sails, any repairs were needed or made, or that her cargo had been damaged. So, we find that when starting on her voyage a second time she was seaworthy.

Having received her sails, the sehooner made her second start on May 15 and proceeded through the Gulf without incident. But on June 21, when in the Atlantic Ocean, she encountered another storm rising to the force of a gale or hurricane. Again the schooner lost her sails. During seven days of pounding, she shipped much water, her deck seams and butts opened and let water into the hold, the steam pump refused to work for a time and the hand pumps did not keep the water from "the cargo, with the result that it suffered the damage of which the libellant complains.

Having found from the evidence that the schooner was seaworthy when first she sailed and, from the same evidence confirmed by the fact that she weathered the gulf storm without known strain, that she was staunch and strong when next she put to sea, it is evident the behavior of her hull in the ocean storm arose from something which occurred after she was well on her voyage. There is no evidence that anything had happened before the storm which contributed to the damage to the ship and her cargo. It follows that it must have been the storm to which the hull yielded. Was, therefore, the storm a “peril of the sea” within the exception of the charter party? This is always a troublesome question because a peril of the sea is not susceptible of a satisfactory, or comprehensive, definition. A storm may or may not be such a peril. The test, however, seems to be — at least it is the one we shall apply in this instance — that when a storm is of Such unusual violence that it cannot reasonably be anticipated and avoided or cannot be resisted by ordinary exertions of skill and prudence and when it has caused unusual and unexpected damage to the hull of a seaworthy vessel resulting in damage to her cargo, the loss may fairly be attributed to a peril of the sea and falls within the exception of the charter party. The Warren Adams (C. C. A.) 74 F. 413; Id., 163 U. S. 679, 16 S. Ct. 1199, 41 L. Ed. 316; The Frey (C. C. A.) 106 F. 319; The Folmina, 212 U. S. 354, 29 S. Ct. 363, 53 L. Ed. 546,15 Ann. Cas. 748; The Newport News (D. C.) 199 F. 968; 24 R. C. L. 1314. And such we are constrained to hold was the case in this marine disaster.

But the owner’s warranty of seaworthiness extends to the ship’s equipment and the owner’s duty to make her seaworthy also extends to her equipment. This rule, clearly recognized by the parties, appears in the averments of both the libel and answer. Of her- equipment that did not withstand the ocean storm were her sails. As most of these were new when she encountered that storm we imagine the libellant does not hopefully charge unseaworthiness or negligence in respect to them. It does, however, very earnestly charge unseaworthiness in respeet to the steam pump, a vital part of a ship’s equipment, saying that, “At no time on the voyage could the steam pump be made to' work.”

So, as in case of the hull, we must examine the pump at the inception of the voyage and at the time of the storm.

There is no evidence as to the condition of the steam pump on April 13 when the schooner first put to sea other than the favorable inference from the survey and classification made by the American Bureau of Shipping immediately before and testimony as to her seaworthiness in general. Entries in the ship’s log on four days before and during the gulf storm show “Lights and pumps attended to.” There are no entries or other evidence that the steam pump would not work during the gulf storm or after the schooner returned to port. It is fair to assume that on her second start the pump was in the condition the log seems to have recorded.

On the first day of the ocean storm the log shows: “Steam pump broke down.” It also discloses that on June 22, 23, 24, 27, 28 and 29 the crew worked the hand pumps. The log does not reveal when, if ever, the steam pump was repaired. In the master’s protest, however, there is an entry: “Steam pump failed to work and vessel’s pumps were worked by hand until repairs were made on steam pump.” This contradicts to some extent the libellant’s statement that “At no time on the voyage could the steam pump be made to work.” That statement is also contradicted by the cook who testified that the steam pump “choked and they cleared it.”

“Q. How long did it take to clear it? A. Didn’t take long, about an hour or two, and it was dear.

“Q. Then did your steam pump operate on the voyage after that? A. Yes, sir; our steam pump operates all times. It would be ninety days, God knows where we would have been if the pump wasn’t going.”

Yet, truly, her steam pump did not work for a time. This was because of a defect in equipment which so far as the record shows was not there before the storm. What caused it ? In the absence of evidence indicating any other probable cause we must hold it was the storm. Being violent enough to rip the sails and damage the hull we are constrained to hold that it was, equally in respect to the pump, a peril of the sea within the exception of the charter party.

The decree of the court dismissing the libel is affirmed.


author: PER CURIAM.

text:
    In re TORGOVNICK.
    No. 367.
    Circuit Court of Appeals, Second Circuit.
    April 20, 1931.

    Nathan B. Fogelson, of New York City, for appellant.

      Nathan Tolk, of New York City, for appellee.
    Before L. HAND, SWAN, and CHASE, Circuit Judges.
   PER CURIAM.

Torgovniek, the bankrupt, filed a voluntary petition in bankruptcy, and was adjudicated. Thereupon he procured a rule against Max Block & Co., Inc., a creditor, to show cause why it should not be stayed from taking out execution against his person upon a judgment entered against him before petition filed in the Municipal Court of the City of New York. The question at issue was whether the judgment was a discharge-able debt, and the District Court concluded that, as Block & Co. had not shown that it was otherwise, execution should be stayed. Block & Co. filed a petition for allowance of an appeal in the District Court and got the appeal allowed there, but filed no copy of the petition here, as prescribed under Rule 36 of this court. The time to appeal has long since expired.

If Torgovnick’s application was a “proceeding in bankruptcy” under section' 24b, 11 USCA § 47 (b), and not a “controversy arising in bankruptcy” under section 24a, 11 USCA § 47 (a), it is abundantly settled that application to this court for leave to appeal must be made within thirty days after the entry of the order, and that allowance by the District Court will not serve. Broders v. Lage, 25 F.(2d) 288 (C. C. A. 8); Stanley’s Incorporated Store v. Earl, 25 F.(2d) 458 (C. C. A. 8); American State Bank v. Ullrich, 28 F.(2d) 753 (C. C. A. 8); Ahlstrom v. Ferguson, 29 F.(2d) 515 (C. C. A. 1); Shoreland Co. v. Conklin, 30 F.(2d) 489 (C. C. A. 5); In re Merchants’ Oil Co., 36 F.(2d) 655 (C. C. A. 10); Gate City Clay Co. v. Dickey, 30 F.(2d) 581 (C. C. A. 8). As our jurisdiction is at stake, we must notice the point, though the appellee has not raised it. Thus the only question open is whether the application was a “proceeding” or a “controversy” in bankruptcy.

An application for a stay against arrest under section 9a (2), 11 USCA § 27 (a) (2) is of course no part of the proceedings to obtain a discharge; nor is a similar application under section 11a, 11 USCA § 29 (a), to stay a suit. However, each is a part of that protection which the statute gives against dischargeable debts; it is somewhat like a provisional or temporary discharge, until the final question can be determined. Indeed, a stay against arrest, which is the case before us, is not alone for the bankrupt’s benefit, but is necessary to the discharge of his duties in the bankruptcy' court, and is granted in some measure, even When the claim is not dischargeable. General Order 12 (1) (11 USCA § 53). It appears to us that in either aspect it must be treated as falling within the same class as the discharge proceedings themselves.

Before the amendments of 1926, judgments granting or denying a discharge, including orders of confirmation of a composition, were reviewed by appeal under section 25a; 11 USCA § 48(a), as distinct from petitions to" revise under section 24b, 11 USCA § 47 (b), but they were nevertheless “proceedings” in bankruptcy, because section 25 (a) so classed them. The amendments confirmed this definition, not only by repeating the classification in section 25 (a), but by the language of section 24 (b) as amended (44 Stat. 665, 664, §§ 10, 9). Moreover, it was uniformly held that steps in the application for a discharge, except the “judgment” itself, must be reviewed by petition, not by appeal. Thompson v. Mauzy, 174 F. 611 (C.. C. A. 4); In re Jacobs, 241 F. 620 (C. C. A. 6); In re White, 248 F. 115 (C. C. A. 9). Similarly since 1926, such orders can be reviewed only by leave of the Circuit Court of Appeals, Broders v. Lage, 25 F. (2d) 288 (C. C. A. 8).

Since, therefore, the order here at bar is to be regarded as ancillary to the discharge, and the discharge is throughout a “proceeding,” we cannot see how it can itself be other than a “proceeding.” Generally speaking, “controversies” are those matters which arise between the estate as a whole and persons who have legal relations With it other than as creditors. The adjudication substitutes for the bankrupt the creditors as a collective group owning the estate. Their mutual disputes are part of the distribution of the estate, intercorporate as it were; they are “proceedings.” Disputes between them in their collective capacity and others are “controversies”; at least this is the gross distinction intended. The discharge of the bankrupt in all its aspects is indeed no part of the distribution of the estate; it .concerns the creditors’ legal relations with the bankrupt, not with one another, but it is nevertheless a privilege following upon the performance of the bankrupt’s dúties, a part of the relief which the proceedings as a whole give to the chief actor. While we have found no decisions upon thei point, we do not hesitate to hold that the application was a “proceeding” under section 24 (b).

Appeal dismissed.


text:
    In re FOSTER CONST. CORPORATION. POPKIN v. D. GINSBERG & SONS, Inc.
    Circuit Court of Appeals, Second Circuit.
    April 20, 1931.
    See, also, 47 F.(2d) 276.
    Louis Jersawit, of New York City, for appellant.
    Leo J. Linder, of New York City, for appellee.
    Before L. HAND, SWAN, and CHASE, Cireiiit Judges.
   PER CURIAM.

D. Ginsberg & Sons, Inc., a creditor of the bankrupt corporation procured from the District Court an order, erroneously called a “ne exeat," forbidding Popkin, the president of the corporation, to leave the jurisdiction; this for the purpose of securing his attendance in the bankruptcy proceedings. Pop-kin moved to vacate the order (“quash the writ”), and the District Court denied the motion by order entered February 21, 1931. On March 21,1931, within thirty days of the entry of the order, Popkin filed a petition for allowance of the appeal with his assignments of error in the District Court, and a copy of both with the clerk of this court on the same day. Our next motion day was on April 6th, at which time he moved for leave to appeal as required by our Rule 36 (1). The subject-matter of the appeal should be heard, unless the application was too late, but the appellee argues that it was, because of the concluding language of subdivision 1, “which motion day must be within the thirty days allowed by the statute for taking the appeal.” The Rule is as follows:

“1. Application for leave to appeal under section 24(b) of the Bankruptcy Act, as amended by Act of May 27, 1926, must' be made by filing in the district court a petition of appeal with assignments of error, and filing in this court a copy of said petition and assignments of error. Copies thereof must be served on the opposing party or parties with a notice of not less than four days that the same will be brought on for hearing on a motion day, which motion day must be within the thirty days allowed by the statute for taking an appeal.
“2. After adjournment of court for the summer vacation it will be deemed a sufficient compliance with the statute and this rule if the petition and assignments of error are filed in both courts within the thirty days and the hearing is noticed for the first motion day after the court reassembles.
“3. If leave to appeal be granted, appeal will be deemed taken as of the date of filing petition for appeal in this court, and if such leave be given appellant must file in the district court a bond for costs within five days after order granting leave is filed; otherwise the appeal will be dismissed by the elerk of this court on the opposing party producing a certificate from the elerk of the district court that the bond has not been filed as required by this rule.
“4. The record on appeal 'must be filed in this court thirty days after the filing of the bond, unless the time be extended by the judge of the bankruptcy court in the manner prescribed by Rule 14, paragraph 1 of this court.”

Section 24(c) of the Bankruptcy Act (11 USCA § 47(e) provides that the appeal “shall be taken within thirty days after the judgment, or order * * * has been rendered or entered.” Is the appeal “taken” in season if a copy of the petition be filed in this court within the statutory period and the appellant moves for allowance at the first motion day thereafter?

We understand that section 24(e) uses the word “taken” in the same sense as similar statutes elsewhere. In the ease of decrees or judgments entered in suits or actions, the appeal may be allowed by either a Circuit or a District Judge, Rule 32(1) of the Second Circuit, but, when allowed by a Circuit Judge, it is “taken” only when lodged in the District Court. Credit Co. v. Arkansas, etc., Ry., 128 U. S. 258, 9 S. Ct. 107, 32 L. Ed. 448; Farrar v. Churchill, 135 U. S. 609, 612, 10 S. Ct. 771, 34 L. Ed. 246; Old Nick Williams Co. v. U. S., 215 U. S. 541, 543, 30 S. Ct. 221, 54 L. Ed. 318. When the appeal is allowed by a District Judge the allowance is treated as itself a lodgment of the appeal in that court, and the appeal is “taken” as of that date. Randall v. Foglesong Machine Co., 200 F. 741 (C. C. A. 6). We construe Rule 36, which requires the original petition to be filed in the District Court and a copy with the elerk of this court and a bond to be filed in the District Court after allowance, as, in substance, conforming to this requirement; for this we rely upon subdivision 3 which makes the date of the appeal, after allowance, that of the filing of the petition here. Unless we admit this retroactive effect of the allowance and the filing of the bond, we cannot preserve the rights of appellants, who must otherwise be' at the mercy of our sittings and at times of the deliberation necessary to a proper consideration of such motions.

The question, however, remains as to when the appeal is “taken,” whether when the petition is filed, or when it is allowed. If the appellant when he files a petition does not intend it to be acted upon until he takes some further action, mere lodgment with the clerk is not enough, Camden Iron Works v. Cincinnati, 241 F. 846 (C. C. A. 6); but any delay of the judge in allowing it does not count against him, if he has done all he can to secure his rights. This seems to us to have been decided in U. S. v. Adams, 6 Wall. 101, 18 L. Ed. 792. It is true that in that ease the rules of the Supreme Court, governing appellate practice in the Court of Claims, particularly provided for the situation, but Mr. Justice Miller went further in the opinion, and laid it down generally that the application for the allowance of the appeal tolled the statute, regardless of the time when it was actually allowed. See, also, Latham v. U. S., 131 U. S. xcvii, appx., and 19 L. Ed. 452. This was the interpretation placed upon those decisions in Randall v. Foglesong, supra, and the same appears to have been assumed in Ross v. White, 32 F.(2d) 750 (C. C. A. 6). In Green v. City of Lynn, 87 F. 839 (C. C. A. 1), the appellant lodged the petition in the Circuit Court, in season, but it was allowed too late. Whether he had done all he could by filing it, and the delay was only that of the judge, does not certainly appear. If so, the decision is contrary to our Understanding of U. S. v. Adams, supra.

In the case at bar, the appellant brought on the motion at the first motion day after a copy of the petition was filed in this court; thus he had done all that was possible, if he had thirty days within which to file his petition. It seems to us that this is the period given by the statute, and that we can require no more than that he shall pursue his application so begun with all speed. Indeed, if the allowance of the appeal is the only effective date, the second subdivision of Rule 36 is itself invalid. A rule cannot extend the period allowed by the statute; the appeal must be perfected in season whether the court be sitting or not.

We therefore think that the phrase in subdivision 1, “which motion day must be within the thirty days allowed by the statute for taking an appeal,” is to be read as meaning that the motion day must he within thirty days, when there is such a day four days or more after the filing of the petition, but that, if there is none, then the next following motion day will serve. While this does violence to the text, only so can the rule-be made to conform with the law. We hold that the moiion was in season, and the appeal is allowed.

The motion to diminish the record is denied.

The motion for a preference is premature, but will be granted, provided that the record is printed and filed with the clerk on or before May 11,1931.

The motion to dispense with printing is denied.


author: MANTON, Circuit Judge.

text:
    THE GERALD A. FAGAN. THE JOHN E. ENRIGHT. DREYFUS et al. v. MARINE TRANSIT CORPORATION.
    No. 293.
    Circuit Court of Appeals, Second Circuit.
    April 20, 1931.
    MaeMin, Brown, Lenahan & Speer, of New York City (Horace L. Cheyney, of New York City,'of counsel), for appellants.
    Otto & Lyon, of New York City (George V. A. MeCloskey, of New York City, of counsel), for appellees.
    Before MANTON, L. HAND, and CHASE. Circuit Judges.
   MANTON, Circuit Judge.

A final decree in admiralty was entered below, on an award of arbitrators, in a proceeding under section 8 of the United States Arbitration Aet (43 Stat. 884, title 9, U. S. Code § 8 [9 USCA § 8]). The controversy arose under a contract whereby appellant agreed to furnish appellee as charterer insurable canal tonnage for about 200,000 bushels of wheat on the Buffalo to New York part of an international carriage from Ft. William, Out., for export. This cargo was “in bond for export,” covered by a bill of lading, as to 19,200 bushels, which was laden upon the' barge Edward A. Ryan, for the loss of which tnis libel was filed and seizure of the tug made. The Ryan, with two other, barges, was in tow of the appellant tug Fagan on September 25, 1928, when, on entering the government loek at Troy, N. Y., the Ryan came in contact with the guide wall and sank with its cargo. The libel is in rem against the tug Fagan and the barge Enright and in personam against the appellant, Marine Transit Corporation. The appellant appeared and filed a claim in rem and gave a stipulation for value to release the tug. The contract included an arbitration provision requiring disputes thereunder to be arbitrated before the Committee on Grain of the New York Produce Exchange. The court ordered the appellant to submit to arbitration all issues under the contract. The arbitration proceeded, and an award was made against the appellant and later confirmed by the eourt below, and the decree appealed from was entered. Later a motion to restrain the recovery on this decree was denied. A discontinuance was entered against the barge Enright.

Section 8 of the Arbitration Act provides : “That if the basis of jurisdiction be a cause of action otherwise justiciable in admiralty, then, notwithstanding anything herein to the contrary, the party claiming to be aggrieved may begin his proceeding hereunder by libel and seizure of the vessel or other property of the other party according to the usual course of admiralty proceedings, and the eourt shall then have jurisdiction to direct the parties to proceed with the arbitration and shall retain jurisdiction to enter its decree upon the award.”

Appellant argues that the Arbitration Act is invalid because in conflict with section 1, art. 3, of the Constitution, providing that the judicial power of the United States shall be vested in the Supreme Court and such inferior courts as Congress may from time to time ordain and establish, and because section 2, art. 3, of the Constitution, provides that the judicial power shall extend “to all Cases of admiralty and maritime Jurisdiction,” and therefore “Congress cannot vest any judicial power in any body otherwise than a court duly created.” Moreover, the argument proceeds, there can be no delegation of this judicial power of the courts either by the courts themselves or by Congress. The Supreme Court and its original jurisdiction was prescribed by the Constitution. Inferior federal courts have only statutory jurisdiction, and Congress may grant as much or little of the judicial power as it will. It has been long settled that the District Courts have only such right to jurisdiction as Congress grants, 'and it may withhold jurisdiction in accordance with the procedural requirements of Congressional enactment. Jackson v. Steamboat Magnolia, 20 How. 296, 15 L. Ed. 909.

The Arbitration Act is a procedural statute and within the competency of Congress. Congress has the power “to malee all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.” Article 1, § 8, clause 18. This includes the power to establish courts, power oyer interstate and foreign commerce (article 1, § 8, clause 3), and jurisdiction over admiralty and maritime matters (article 3, § 2, clause 1). The Arbitration-Act is directed solely to a remedy. Atlantic Fruit Co. v. Red Cross Line, 5 F.(2d) 218 (C. C. A. 2); Matter of Berkovitz v. Arbib & Houlberg, 239 N. Y. 261, 130 N. E. 288. The validity of a clause providing arbitration under the New York Arbitration Act (Consol. Laws, c. 72) was held no constitutional impediment in Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109, 44 S. Ct. 274, 276, 68 L. Ed. 582. In that ease it was said that agreements in admiralty to submit controversies to arbitration were valid and “reference of maritime controversies to arbitration had long been common practice.”

The aet does not deprive the District Court of jurisdiction, but seems to enlarge that jurisdiction so as to embrace the enforcement of arbitration agreements not only by ordering such arbitration to proceed, but by entering a decree upon the award. The Supreme Court said in Red Cross Line v. Atlantic Fruit Co., supra (at page 123 of 264 U. S., 44 S. Ct. 274, 277): “The reluctance of the admiralty eourt to lend full aid-goes, however, merely to the remedy.” And that “the substantive right created by an agreement to submit its disputes to arbitration is recognized as a perfect obligation.”'

The power under section 8 to enforce specific performance of the contract to arbitrate is but a remedy incident to jurisdiction under the act. Hartford Accident Co. v. Southern Pacific, 273 U. S. 207, 47 S. Ct 357, 71 L. Ed. 612; Morse Drydock Co. v. The Northern Star, 271 U. S. 552, 46 S. Ct. 589, 70 L. Ed. 1082. The loss of cargo was-a proper subject for arbitration under the contract; it was a subject-matter the parties intended to arbitrate if a loss occurred-

The suggestion that the grain committee was not qualified to pass upon the questions presented is sufficiently answered by the fact that the parties selected them to do so. The claim that the committee had no regard for the defense under the provisions of the Harter Act (46 USCA §§ 190-195) is without merit. The New York Produce Exchange canal grain charter party No. 1 excludes the application of the Harter Act by its provisions. The criticism of the sufficiency of the libel is equally without merit. It is immaterial whether the libel against the appellant sounds in tort or in contract. Dampskibs Aktieselskabet Thor v. Tropical Fruit Co., 281 F. 740 (C. C. A. 2). That the award was not signed by all the arbitrators is not a barrier forbidding entry of the decree. There is no provision of the contract cited nor does the act of Congress require unanimity. A committee of four out of five signed the award.

But it is said the grain was not established to be for foreign shipment. It was shipped to the order of the Bank of Nova Scotia from Ft. William, Ontario, and “in bond for export,” and appellant’s bill of lading provided: “Deliver only on surrender of original Lake Bill of Lading properly endorsed.” The lake bill of lading recognized the shipment as international. The bond is given by the carrier. Section 551 of the Act of Sept. 21, 1922, 42 Stat. 975, section 451, title 19, U. S. Code (19 USCA § 451). See B. & O. S. W. R. R. Co. v. Settle, 260 U. S. 166, 43 S. Ct. 28, 67 L. Ed. 189.

Since it was an international carriage, there is no doubt the Arbitration Act applies. But section 8 provides, as the basis of jurisdiction, an admiralty cause of action involving libel and seizure, and it declares such basis of jurisdiction to be independent of the provisions of the act “notwithstanding anything herein to the contrary.” From an examination of this act, it will appear that the terms “maritime transactions” and “commerce” defined in section 1, are found again in section 2 (9 USCA §§ 1, 2). Sections 4 and 8 (9 USCA §§ 4, 8), which permit applications to the court, make no reference to these terms.

The parties claiming to be aggrieved at bar were the appellees as they applied under section 8 of the Arbitration Act because of the appellant’s “failure, neglect, or refusal * * * to arbitrate under a written agreement for arbitration” (section 4), and nothing in either section 4 or 8 confines such written agreement for arbitration to . agreements involving maritime transactions in the limited sense. Section 1, with reference to foreign commerce as distinguished from any other subject-matter of which a court of admiralty would have 'jurisdiction under the Judicial Code in the terms of section 4 or apart from the arbitration agreement, covers matters which would be justiciable in admiralty under section 8.

The canal was used here as a waterway for foreign commerce — from Canada for export. It is a waterway within the scope of the admiralty jurisdiction. The Robt. W. Parsons, 191 U. S. 17, 24 S. Ct. 8, 48 L. Ed. 73. Section 8 is ample authority for entering the decree upon the award. The basis of jurisdiction was a cause of action justiciable in admiralty. The court enjoined the libel filed, and appellant gave the stipulation for value. Section 8 under these circumstances gave free hand to the admiralty jurisdiction, substituting arbitration for trial before the court with the “usual course of admiralty proceedings.”

The libel and seizure was a proceeding in rem. There was the direction that the parties proceed with the arbitration and entry of a decree upon the award. The decree necessarily would be in the usual form of a decree in rem, against the res if not released, or against the claimant and stipulators, if the stipulation is substituted for the vessel. The appellant appears as respondent in the personam libel and as claimant in the in rem proceeding. This practice is common. Merritt & Chapman v. Chubb, etc., Co., 113 F. 173 (C. C. A. 2). The libel was maintainable in rem, and the stipulation given as a substitute for the vessel makes the stipulator liable to the exercise of every authority in the power of the court which it could exercise if the res was still in the court’s custody. The Wanata, 95 U. S. 600, 24 L. Ed. 461; The Palmyra, 25 U. S. (12 Wheat.) 1, 6 L. Ed. 531; The Glide, 72 F. 200 (C. C. A. 4); The New York, 104 F. 561 (C. C. A. 6).

Admiralty Rule 8 (Southern District) provides: “Such stipulation shall contain the consent of the stipulators, that if the libellant or petitioner recover, the decree may be entered against them for an amount not exceeding the amount named in such stipulation and that thereupon execution may issue against their goods, chattels, lands, and tenements or other real estate.”

Section 8 of the Arbitration Act contemplated that the liability arbitrated between the parties was a liability that attached to the tug as well as to the owner in personam. The objection that error was committed in entering a deeree against the stipulator therefore is without force.

Decree affirmed.


text:
    COSULICH LINE OF TRIESTE v. BOWERS.
    No. 310.
    Circuit Court of Appeals, Second Circuit.
    April 20, 1931.
    L. HAND, Circuit Judge, dissenting.
    Karlin, Campbell, Hickox, Keating & MeGrann, of New York City (Charles T. Cowenhoven, Jr., and H. Maurice Fridlund, both of New York City, of counsel), for appellant.
    George Z. Medalie, U. S. Atty., of New York City (Harry G. Herman, Asst. U. S. Atty., of New York City, of counsel), for appellee.
    Before MANTON, L. HAND, and CHASE, Circuit Judges.
   MANTON, Circuit Judge.

This action is brought to recover a tax imposed by section 800, title 8, of the Revenue Act of 1926 (44 Stat. [pt. 2] 99 [26 USCA § 901]) upon the sale of steamship tickets. It provides: “ * * * There shall be levied, collected, and paid, for and in respect of the several * * * documents * * * mentioned and described in Schedule A of this chapter, * * * by any person who makes, signs, issues (or) sells * * * the same * * * the several taxes specified in such schedule.”

Schedule A (5) provides in part as follows: “Passage ticket, one way or round trip, for each passenger, sold or issued in the United States for passage by any vessel to a port or place not in the United States. * * * >!

By agreement of May 27,1926, the Salaam Temple of Newark, N. J., agreed to purchase the full complement of passenger accommodations at a fixed charge, on the Presidente Wilson for a return trip from New York to Bermuda. The appellant claimed it contracted for a private charter of the vessel, -while the appellee says it was a sale of tickets in bulk. The contract between the Salaam Temple and the steamship company provided, among other things, in paragraph 7, that—

“Operating expenses, including port charges — docking, pilotage and other inei'dentals in operating the ship, will be borne1 by this Company.” , ’

Paragraph 9: “The stay at Bermuda must be left to the discretion of the Captain in order to insure his arrival back to New York on Monday morning. * * * ”

Paragraph 10: “Membership cards: It is understood that each guest will be provided by you with a membership card on which will appear the berth and cabin assigned and will be used as identification of the guest on board.”

Paragraph 12: “Contract as drawn up is in accordance with the general terms and conditions of the regular ocean steamship passenger ticket on file in this office and at the disposal of your Committee at all times.”

The identification ticket issued by the Salaam Temple provided: “While it is the aim of Salaam Temple to give all passengers the best possible service and attention throughout, responsibility must be declined by Salaam Temple for damages or delays on the Pilgrimage, or through imposition of quarantine, customs inspection, or any casualty or untoward incident which may be occasioned by circumstances beyond the control . of Salaam Temple. Transportation is furnished by the Cosulieh Line in accordance with their general rules, regulations and passage contract.”

These provisions of the contract and the understanding stated in the identification ticket show that the agreement was for the transportation of the passengers, and, while all the passenger space was reserved by the Salaam Temple, it is quite clear that this was not a demise of the vessel to the Temple. The control of the vessel remained with the owner. Its navigation and operation were in the hands of the vessel owner. Indeed, the Salaam Temple exercised no degree of control over the vessel other than the right to transportation and 'the exclusive accommodation for its members and friends 'as passengers. The rule is stated in Leary v. United States, 81 U. S. (14 Wall.) 607, 610, 20 L. Ed. 756, as follows:

“If the charter-party let the entire vessel to the charterer with a transfer to him of its command and possession and consequent control over its navigation, he will generally be considered as owner for the voyage or service stipulated. But, on the other hand, if the charter-party let only the use of the vessel, the owner at the same time retaining its command and possession, and control over its navigation, the charterer is regarded as a mere contractor for a designated service, and the duties and responsibilities of the owner are not changed. In the first case the charter-party is a contract for the lease of the vessel; in the other it is a contract for a special service to he rendered by the owner of the vessel.”

See, also, The Allianca, 290 P. 450 (D. C. E. D. Va.); Boston Elevated Ry. Co. v. Malley, 288 P. 864 (D. C. E. D. Mass.).

The tax in question is to be paid, under the phrase of the statute, on passenger tickets sold or issued, one way or round trip for each passenger. The sale of tickets provided for a minimum of 400 passengers for a lump sum of $30,000. The berthing capacity of the vessel was stated to be in excess of 400, but a flat rate of $35 was specified to cover all passengers booked in excess of the minimum number of 400. An initial deposit of $5,000 was paid, and “the balance of the total passage money, including passengers booked in excess of 400,” was to be paid prior to the commencement of the voyage. There were 451 passengers, and, dividing that number into the lump sum of $30,000, the Commissioner arrived at the figure of $67 as the cost of passage per person. He assessed a tax of $5 for each of the 451 passengers. The tax is to be paid under the statute by the person who issues and sells the tickets. The Salaam Temple members were, the passengers. It merely identified by its cards the persons and the accommodations they were to occupy on the vessel. The transportation was by the steamship company. It had control of the navigation, and had charge at all times of the vessel, and this was by its officers and crew. It paid the expenses of the operation of the vessel, the lighterage and docking charges. The Temple merely purchased all the tickets for the voyage. When it obtained the tickets, it distributed them with identification cards to its members, but in the first instance the appellant sold the 451 tickets to the Salaam Temple for passengers to be carried on its vessel on a trip between New York and Bermuda. What happened after that sale is unimportant. It is a sale which is taxable within the statute.

Judgment affirmed.

L. HAND, Circuit Judge, dissenting, without opinion.


author: FOSTER, Circuit Judge.

text:
    CITY OF LAUREL et al. v. MISSISSIPPI GAS CO.
    No. 6130.
    Circuit Court of Appeals, Fifth Circuit.
    April 27, 1931.

      Ellis B. Cooper, Henry Hilbun, and Jeff Collins, all of Laurel, Miss., for appellants.
    J. H. Thompson, of Jackson, Miss., and Forney Johnston, of Birmingham, Ala. (Robert H. Thompson, of Jackson, Miss., White & Case and Lowell Wadmond, all of New York City, and Cabaniss & Johnston, of Birmingham, Ala., on the brief), for appellee.
    Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.
   FOSTER, Circuit Judge.

This is an appeal from a decree granting a temporary injunction against the city of Laurel to restrain it from interfering with the distribution of natural gas by appellee, the Mississippi Gas Company.

There is no dispute as to the material facts. The gas company is the owner of a franchise, not exclusive, the material part of which is as follows: “That the said grantee shall be and it is hereby granted a franchise for a period of 25 years from date of the acceptance of this ordinance as hereinafter provided, with full right, power and authority to establish, construct, maintain, extend and operate a plant of machinery, mains, pipes and other apparatus and appliances within the corporate limits of the City of Laurel, State of Mississippi, for the purpose of generating and furnishing to the City of Laurel, and its inhabitants, gas for light, heat and other purposes, and for such purpose to enter upon and use the streets, avenues, highways and alleys, and public grounds of said City of Laurel, and lay, maintain, operate, repair and extend thereon, thru and thereunder, such mains, pipes, apparatus, and appliances as may be necessary and proper subject to the terms and conditions hereinafter provided.”

For a number of years the gas company has been supplying the city of Laurel and its inhabitants with artificial gas and has laid its mains and pipes in the streets of that city. The franchise has a. number of years to run. Recently, before the bill was filed, the gas company made arrangements to secure a supply of natural gas, and thereupon entered into a contract with the Masonite Corporation to supply it with natural gas at the latter’s plant. This required the laying of , about two. miles of pipe, some through the streets of the city. The city of Laurel, through its mayor and commissioners, declined to permit the laying of this additional pipe until the gas company secured a new franchise or entered into an agreement reducing its rates for. gas. The gas company has an investment of about $200,000, and the maximum rates to be charged the consumers are fixed by the terms of the franchise.

The sole question presented on this appeal is whether the gas company has the right to distribute natural gas through its existing system and to extend that system undér the provisions of its franchise.

Of course, a public franchise is to be construed in favor of the public, but nevertheless it must be given a just and reasonable construction. Russell v. Sebastian, 233 U. S. 195, 34 S. Ct. 517, 58 L. Ed. 912, Ann. Cas. 1914A, 152. It is contended by the city that the provisions of the franchise for the erection and maintenance of a plant for the manufacture of artificial gas require a construction that the company was restricted to the distribution of that kind of gas and exclude any right to distribute natural gas. Such construction would not be in favor of the people of Laurel. The main object to be achieved was the supplying of gas for heating and lighting. It may well be that natural gas is both better and cheaper. It is merely incidental to the furnishing of gas that it be first manufactured. If nature performs that function, it would be a reasonable construction of the franchise that the right to furnish gas to the city of Laurel includes the furnishing of natural gas. If that is done, the right to generate the gas then becomes incidental and immaterial.

It is contended by the gas company that the natural gas to be supplied would have greater value in heat units and at the same price would be to the advantage of tbe consumer. Whether this is true is immaterial. The city of Laurel has the right to prescribe just and reasonable rates for gas, provided they do not impair the obligation of any valid existing contract. Section 2426, Mississippi Code of 1930. No doubt this authority is ample to protect the city and its citizens against unfair rates. However, as that question does not 'arise on this appeal, we will refrain from so deciding.

It is unnecessary to review the authorities cited by either side. They are somewhat in conflict, but none of them is controlling or persuasive to a different conclusion than that above expressed. It is clear that the city of Laurel and its inhabitants can suffer no damage by the issuance of the injunction, pending a final determination on the merits, while on the other hand the gas company will be greatly damaged if it is prevented from carrying out its contract with the Masonite Company. There was no abuse of discretion in granting the interlocutory injunction.

The record presents no reversible error.

Affirmed.