author: HICKS, Circuit Judge.

text:
    JOS. DENUNZIO FRUIT CO. v. COMMISSIONER OF INTERNAL REVENUE.
    No. 5703.
    Circuit Court of Appeals, Sixth Circuit.
    April 15, 1931.
    H. J. Graham, of Louisville, Ky. (Theodore B. Benson, of Washington, D. C., on the brief) .for petitioner.
    S. Dee Hanson, of Washington, D. C. (G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, C. M. Charest, and Percy S. Crewe, all of Washington, D. C., on the brief), for respondent.
    Before DENISON, MOORMAN, and HICKS, Circuit Judges.
   HICKS, Circuit Judge.

Petition by Jos. Denunzio Fruit Company to review a decision of the Board of Tax Appeals affirming the action of the Commissioner of Internal Revenue in assessing, on redetermination, a deficiency in income and excess profits taxes against it for the-year 1921 in the sum of $49.43. Petitioner, a Kentucky corporation, having its office and principal place of business in Louisville, had, prior to 1920, been engaged in buying and selling citrous fruits. It had an arrangement with one Spivey of Clearwater, Fla., to .purchase and pack the fruits required to supply its trade. Spivey died in 1920.'

Desiring to continue the Florida business, Mark Denunzio, Charles Scholtz, and Fred Seholtz, the officers, directors, and stockholders of petitioner, in July, 1920, organized the Spivey Packing Company, also a Kentucky corporation, having its home office in the offices of petitioner at Louisville but operating at Clearwater, Fla. The Spivey Company was capitalized at $30,000 represented by 300 shares of common stock having full voting rights. Of this stock petitioner owned 241. shares, Mark Denunzio 3 shares, Charles Seholtz 3 shares, Fred Seholtz 8 shares, and S. J. Meares, of Clearwater, Fla., 50 shares. Charles Seholtz was president, Mark Denunzio, vice president, and Fred Seholtz, secretary and treasurer, and the three were directors, of each corporation.

Meares was unable to pay for all of his :50 shares of stock, and, notwithstanding a general oral agreement that the stockholders in the Spivey Company would not sell to ■outside parties, he, with the consent of the ■other stockholders, sold one-half of his stock ■to his brother E. T. Meares. During the life of the Spivey Company, S. J. Meares attended at least one and probably more of the meetings of its directors and stockholders at Louisville at petitioner’s expense.

Because of his previous experience in the business under Spivey, S. J. Meares was made general manager of the Spivey Company at a salary of $1,500 per annum. The Spivey Company bought from Mrs. Spivey the packing plant originally operated by Spivey at Clearwater, and under the management of Meares continued to buy and ship fruit therefrom until about July, 1921, when it failed. Meares would purchase fruit under the general supervision and direction of petitioner and would pack and ship to petitioner under its own brands and trademarks, and generally at cost, such portion of the purchases as petitioner required. The remainder would be sold under the general direction of petitioner to other parties. For the year ending June 30,1921, the total sales of the Spivey Company were $238,632.81 of which amount $108,192.35 was purchased by petitioner.

Petitioner during the operations of the Spivey Company advanced to it the sum of $67,052.68. The Spivey Company, on account of the decline in prices, suffered a net loss of $15,953.41 for the year ending June 30, 1921. Thereupon petitioner sold all the assets of the Spivey Company for about $15,-000 and paid all its liabilities. Petitioner received nothing.by way of distribution upon its 241 shares of Spivey stock. It is made clear by the testimony of Denunzio and the Scholtz brothers that there was no limitation upon the right of the Meares brothers to vote or otherwise to control their stock as they pleased. It is equally as clear that, while there was a general understanding that a stockholder should not sell to an outsider except by consent, yet there was no requirement compelling petitioner or any of its stockholders to buy.

The only issue before the Board of Tax Appeals was, whether petitioner and the Spivey Company were, for the calendar year 1921, affiliated within the meaning of section 240 (c) of the Revenue Act of 1921, 42 Stat. 227, 260 (26 USCA § 993 (c). It might reasonably be said that through the affiliated interests of Denunzio and the Seholtz brothers petitioner controlled the business of the Spivey Company, but since the ease of United States v. Cleveland, P. & E. R. Co., 42 F.(2d) 413, 418 (C. C. A. 6), business control is no longer determinative. We there said: “Congress made determinative not actual control of the related companies, or of the subsidiary by the parent company, but the substantial ownership or control of their stock, or of the stock of the subsidiary by the parent company.”

By this test the two companies were not affiliated. Petitioner owned 8OH per cent, of the Spivey Company stock, Denunzio and Seholtz brothers owned 3 per cent. Petitioner through its directors and stockholders controlled only 83H per cent. Put in another way, Denunzio and Seholtz brothers, representing “the same interests” in both corporations, controlled all of petitioner’s stock, but only 83% per cent, of the Spivey Company stock. We do not think 83% per cent, is “substantially all.” TJ. S. v. Cleveland, P. & E. R. Co., supra.

We conclude therefore that upon the record there appears no sufficient reason for saying that the Board was unjustified in holding that petitioner and the Spivey Company were not affiliated within the meaning of the statute in question.

Affirmed.


source: Caselaw Access Project

license: Public Domain

text:
    GAUSEPOHL v. UNITED STATES.
    No. 5756.
    Circuit Court of Appeals, Sixth Circuit.
    April 15, 1931.
    J. T. Murphy, of Covington, Ky. (Blakely & Murphy, of Covington, Ky., on the brief), for appellant.
    Sawyer A. Smith, of Covington, Ky., for the United States.
    Before HICKS and HICKENLOOPER, Circuit Judges, and NEVIN, District Judge.
   HICKS, Circuit Judge.

Appellant Gausepohl and William Porter were convicted of selling intoxicating liquor in violation of section 3, title 2, of the National Prohibition Act. Title 27, § 12, U. S. C. (27 USCA § 12). By somewhat varied assignments of error appellant challenges the denial of a directed verdict. He also assails the order of the court overruling a demurrer to the indictment and insists in addition that “the court failed to instruct the jury as to all the law of the case based on the facts and evidence produced.”

The motion for a directed verdict was properly denied.

Hays, a prohibition agent, testified that on July 5th (inferentially 1930), at about 9 p. m., he went to a place at Nineteenth and Howell streets in Covington, Ky., known asGausepohl’s Place; that there he purchased' from Porter a pint of Walker’s Canadian whiskey, paying him $5 for it; that there-was a bar in tire place, “just a saloon like”; that Porter went into a rear room and got the whisky, that he (witness) returned to that place on July 8th at night; that Gausepoíd was then behind the bar; that he asked Gausepohl for a pint of Canadian whisky; that Gausepohl replied “0. K.,” went into the rear room, procured a pint of Walker’s whisky, wrapped it in a newspaper, and handed it to witness, who then paid Gausepohl $5 for it; that he (witness) returned to this place on July 30th with Prohibition Agent Green; that he then and there witnessed a sale of whisky by Porter to Green, and that Gausepohl was present. Green corroborated Hays as to the sale by Porter on July 30th and as to Gausephol’s presence on that occasion.

We think this evidence is sufficient to support the verdict. From it a fair-minded jury could conclude that Gausepohl was guilty beyond a reasonable doubt. It is true that this incriminating evidence was denied by appellant, and that in addition he undertook to establish an alibi, to wit, that upon the relevant dates he was on a trip tq Detroit. But we do not pass upon the weight of thé evidence or the credibility of witnesses. These were matters for the consideration of the jury. Burton v. U. S., 202 U. S. 344, 378, 26 S. Ct. 688, 50 L. Ed. 1057, 6 Ann. Cas. 362; Zottarelli v. U. S., 20 F.(2d) 795 (C. C. A. 6); Hyney v. U. S., 44 F.(2d) 134,. 136 (C. C. A. 6).

The “demurrer” to the indictment consisted of nothing more than an oral motion to quash. Its substance is not disclosed. There was a motion in arrest of judgment upon the broad ground that the indictment did not allege an offense, but this motion in arrest was entirely too late. It was filed more than seventy-five days after judgment. See Durland v. U. S., 161 U. S. 306, 315, 16 S. Ct. 508, 40 L. Ed. 709; Melnerney v. U. S., 147 F. 183, 184 (C. C. A. 1). But, passing over these procedural matters, we think the indictment was sufficient. It is attacked in the brief upon the ground that it alleges neither the time nor place of the commission of the offense nor the amount or kind of liquor sold, .nor the name of the purchaser, nor any other attending circumstances. The indictment charges that “whisky” was sold, and by statutory definition whisky is intoxicating liquor. Title 27, § 4 of the National Prohibition Act. See, also, Johnson v. U. S., 46 F.(2d) 7, 8 (C. C. A. 6). Section 32 of title 2 of the Prohibition Act (27 USCA § 49) provides that it shall not be necessary 'for the indictment to give the name of the purchaser. In Husty et al. v. U. S., 51 S. Ct. 240, 242, 75 L. Ed.-, decided February 24, 1931, the Supreme Court, considering an indictment embracing counts for the transportation and possession of liquor and based upon the same section of the National Prohibition Act as was the indictment here in question (section 12), said: “The indictment is in the form authorized by section 32 of title 2 of the National Prohibition Act (27 USCA § 49). It charges the transportation of intoxicating liquor * * * and possession * * * at a named time, and at a place within the jurisdiction of the court. Failure to state more specifically the amount of the liquor, and the time and place of the offenses charged, does not affect the validity .of the indictment. It was at most ground for a bill of particulars, if timely application had been made. See Durland v. U. S., 161 U. S. 306, 315,16 S. Ct. 508, 40 L. Ed. 709.” This pronouncement is applicable here. Leonard v. U. S., 18 F.(2d) 208; 211 (C. C. A. 6), is in accord. See, also, Miller v. U. S. (C. C. A.) 300 F. 529, 532.

‘ [5] In its criticism of the court’s charge appellant’s brief diverges from the assignment of error. The assigned error was that the court failed to instruct the jury as to all the law of the case. In the brief the purported eirp-r was that certain of the instructions were incorrect. We have examined the charge and think that the.objections to it axe without merit. It is not prejudicial. A fair and reasonable interpretation of its language is really more favorable to appellant than the law justifies because under it the jury were required to believe beyond a reasonable doubt that appellant, not only sold whisky to Hays, but that he also aided and abetted in the sale to Green before he could be convicted of even a single sale. But the objection to the-charge must be overruled because there was no exception to it in the court below. Further, there was no request for additional instructions. Isaacs v. U. S., 159 U. S. 487, 491, 16 S. Ct. 51, 40 L. Ed. 229; Derango v. U. S., 18 F.(2d) 778 (C. C. A. 6).

Affirmed.


text:
    DOERNING v. UNITED STATES.
    No. 5755.
    Circuit Court of Appeals, Sixth Circuit.
    April 15, 1931.
    J. T. Murphy, of Covington, Ky. (Blakely & Murphy, of Covington, Ky., on the brief), for appellant.
    Sawyer A. Smith, of Covington, Ky., for the Ufiited States.
    Before HICKS and HICKENLO OPER, Circuit Judges, and NEYIN, District Judge.
   HICKS, Circuit Judge.

Appellant Doeming was convicted of selling and of the second offense of possessing intoxicating liquor in violation of sections 3 and 29, title 2, of the National Prohibition Act (title 27, §§12 and 46, U. S. C. [27 USCA §§12 and 46]). There was a general verdict of guilty upon which appellant was sentenced. Appellant commenced the service of the sentence, and it was not until several months thereafter that a motion in arrest of judgment was filed in his behalf.

The assignments of error' can raise no question upon the sufficiency of the evidence. There was no motion for a directed verdict.

In response to the question “Do you know this to be the same John Doeming who was convicted in case 5475?” Hartón, a witness for the government, replied, “It is.” This was assigned as error, but the objection is without merit. Being charged with the 'second offense of possessing liquor, the evidence was admissible to identify Doeming as the party who had theretofore been convicted of the first offense.

The introduction of the court records to establish the fact of the first conviction for possessing is assigned as error. This is not only without merit, but cannot be considered. Thgre was no objection upon the trial to the introduction of the record.

The only attack upon the indictment in the court below was by a motion in arrest of judgment upon, the broad ground that the facts stated therein did not constitute an offense. This motion in arrest, filed July 12, 1930, was too late. See Gausepohl v. U. S. (C. C. A.) 49 P.(2d) 43, this day decided. The judgment was entered April 17, 1930. But, passing over the matter of procedure, we think the indictment, similar to the Gausepohl indictment, was valid upon the ground set forth in the Gausepohl opinion.

In an exhaustive brief appellant for the first time attacks the constitutionality of the Jones Act (Act Mar. 2, 1929, c. 473, 45 Stat. 1446 [27 USCA §§ 91, 92]) under which appellant was sentenced. The argument (assuming that it is timely) is that the proviso therein delegates to the trial court legislative power in violation of article 1, § 1, of the Constitution. The answer is that the proviso delegates no such power.

“The proviso is only a guide to the discretion of the court in imposing the increased sentences for those offenses for which an increased penalty is authorized by the act. See Ross v. U. S. (C. C. A.) 37 F.(2d) 557, certiorari denied 281 U. S. 767, 50 S. Ct. 466, 74 L. Ed. 1175; McElvogue v. U. S. (C. C. A.) 40 F.(2d) 889, certiorari denied 282 U. S. 845, 51 S. Ct. 24, 75 L. Ed.-, Oct. 13, 1930.” Husty v. U. S., 51 S. Ct. 240, 242, 75 L. Ed. -, decided by the Supreme Court Feb. 24,1931.

Other than by this attack upon the constitutionality of the Jones Act the propriety of the sentence is not seriously controverted.

Affirmed.


author: SIBLEY, Circuit Judge.

text:
    KEEN & WOOLF OIL CO. v. COMMISSIONER OF INTERNAL REVENUE.
    No. 5806.
    Circuit Court of Appeals, Fifth Circuit.
    April 14, 1931.

      Robert A. Littleton, of Washington, D. C., for petitioner.
    G. A. Youngquist, Asst. Atty. Gen., Se-wall Key, J. Louis Monarch, and Helen R. Carloss, Sp. Assts. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and A. H. Pierce, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for respondent.
    Before BRYAN, SIBLEY, and HUTCHESON, Circuit Judges.
   SIBLEY, Circuit Judge.

Petitioner, Keen & Woolf Oil Company, is a corporation from which an excess profits tax was ‘due for its fiscal year ending May 31,1920: The sole dispute is over the value' to be given to one item of its invested capital, being oil leases for which the company at its organization on May 22,1919, paid to Keen & Woolf, a partnership, 1,100 shares of its preferred stock at a par value of $110,-000, and its entire common stock, 30,000 shares of no par value, put at $90,000. The aggregate sum of $200,000 is agreed to be the fair market value of the leases on that dates. But the decision of the Board of Tax Appeals was that the proper allowance for invested capital in the leases is not their value'when pétitioner acquired them, but $92,-118.74, their cost to the former owners, Keen & Woólf, because Keen & Woolf through the stock received for the leases continued to have an interest in and control over them of 50 per centum or more. The further pertinent facts are that, on the date of petitioner’s organization immediately after the transaction with Keen & Woolf, petitioner made a'contraet.with one Jester whereby he was to sell, or, on failing to sell by a fixed date, was to buy, 3,900 additional shares of preferred treasury stock, and, to aid him in doing this, by a separate agreement, Keen & Woolf offered to give a bonus of two or three shares of their common stock with each share, of preferred stock sold for the company. Jester’s first sale was of 92 shares on July 9, 1919. Until then no person held any stock except Keen & Woolf. By December 1, 1919, Jester’s operations were completed. After that date Keen & Woolf held 1,100 shares of preferred stock and 16,500 shares of common stock, and other persons held 3,920 shares of preferred and 13,500 of common stock. The concurrence of three-fourths of the preferred stock was necessary to mortgage the fixed property of the corporation, but the preferred stock had no vote otherwise until. after six consecutive defaults in payment of its dividends, or upon failure to comply with certain provisions touching the surplus fund. Ordinarily the entire control of the corporation was in the common stock.

The applicable statute is section 331 of the Revenue Act of 1918, 40 Stat. p. 1095. Since Keen & Woolf were not a corporation, and did not reorganize or consolidate their entire business in this transaction, but only changed the ownership of some of their property, we omit inapposite portions of the statute, and quote as applicable these words: “In the ease of the * * * change of ownership of property, after March 3, 1917, if an interest or control in such * * * property of 50 per centum or more remains in the same persons, or any of them * * * if such previous owner was not a corporation, then the value of any asset so transferred or received shall be taken at its cost of acquisition (at the date when acquired by such previous owner) with proper allowance for depreciation,” etc. Before this section was enacted there were efforts to evade the excess profits tax by devices for increasing invested capital. La Belle Iron Works v. United States, 256 U. S. 377, 41 S. Ct. 528, 65 L. Ed. 998. The object of the section was to prevent the swelling of the invested capital by including war-time inflations since March 3, 1917, on putting the ownership of property into a corporation if the real interest or control was not changed by more than 50 per cent-um. If one-half or more of either interest or control remained in the same persons or any of them, the transfer was to be considered as insufficient to alter the basis of valuation of the transferred property in this tax accounting. The excess profits tax was imposed only on corporations. Therefore transfers to them only are involved. The interest and control of 50 per centum or more which survives the transfer must include that of stockholders through their stock. This is a most obvious and the most usual way to retain interest and control over property transferred to a corporation. “Interest” refers to ownership, and may be retained either through preferred or common stock, and independently of voting power. “Control” refers to voting power. It may include pooling arrangements and voting trusts. Thus constrains' the statute, it is plain that, at the time of the change of ownership of the leases, the transferors Keen & Woolf became the owners of every outstanding share of stock, both preferred and common, and so retained a 100 per centum interest and control of the transferred property. It is true that immediately afterwards arrangements were made to issue other stock, and to transfer part of theirs, but until this was accomplished weeks later they continued to be the sole stockholders. We think the character of the transfer of property under this statute is fixed at the time it occurs, and that it will not be changed by subsequent transfers of stock. Those who buy stock of the corporation afterwards take the corporate affairs in this, as in other respects, as they find them. The statue applies the restricted valuation: “If an interest or control of such property of fifty per cent, or more remains in the same persons,” not while it so remains. But, if this interpretation be discarded, the result is the same, because after all stock transfers were completed on December 1, 1919, Keen & Woolf still had more than 50 per cent, control in owning 16,500 shares of the common stock out of a total of 30,000 shares, and this continued throughout the taxable year, no default occurring that would transfer voting power to the preferred stock. The transferred property must therefore, in estimating invested capital of the petitioner, be put at the same valuation as was given it in the hands of Keen & Woolf before transfer.

Petition denied.


author: WILBUR, Circuit Judge.

text:
    PEARSON et al. v. HIGGINS.
    No. 6296.
    Circuit Court of Appeals, Ninth Circuit.
    April 13, 1931.
    George D. Collins, Jr., of San Francisco, Cal., for appellants.
    Torregano & Stark, of San Francisco, Cal., for appellee.
    Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges.
   WILBUR, Circuit Judge.

This is an appeal from a turnover order in a bankruptcy proceeding. The question involved was stated upon a former appeal in which the jurisdiction of the referee in bankruptcy to determine the controversy as to the uncompleted boat named “Saxon” was attacked. The jurisdiction of the referee to determine that question was upheld and the case was remanded for further proceedings. Pearson v. Higgins (C. C. A.) 34 F. (2d) 27. The appellants answered the trustee’s petition for a turnover order, asserting that the boat was partnership property and that Arvid Pearson, as a member of the partnership, was entitled to possession of the partnership property and to liquidate its affairs.

The only evidence introduced before the referee was an agreement between the bankrupt Morgan and the appellant Pearson dated August 19,1927, and a letter by appellant Pearson addressed to the bankrupt dated June 15, 1928, four days before the petition in bankruptcy was filed by' the bankrupt (June 19, 1928). The written contract was clearly one of copartnership. It provided that the parties should mutually devote all of their working time to the completion of the yacht; that appellant Pearson had paid $1,300 cash toward the purchase of the one-third interest in the completed vessel and that his labor upon the boat should be credited to his one-third interest; and-that if it were not sufficient to pay one-third of the cost of the boat he would pay $25 per month additional from Ms share of the receipts derived from the joint use of the vessel. The profits of the operation of the vessel were to be shared equally. The agreement was to take effect August 9, 1927, and to hold good until October 1,1929. It was provided that during that time the appellant Pearson was to pay to the bankrupt the equivalent in value of one-sixth of the vessel so as to make him half owner of the vessel. The letter referred to was as follows:

“Dear Sir: I hereby rescind and you are hereby notified of said rescission of that particular contract entered into by you and the undersigned on the 19th day of August, 1927, relative to the purchase of an interest^in the boat ‘Saxon’. Said rescission is made upon the grounds that you fraudulently misrepresented certain facts concerning said boat ‘Saxon’.
“Dated this 15th day of June, 1928.
“Arvid Pearson.”

By the terms of tMs agreement the boat undoubtedly became partnership property. It is not seriously contended otherwise. The referee, however, by his order dated January 31,1930, determined that the trustee in bankruptcy1 “was entitled to the immediate sole and exclusive possession of said boat for the purpose of administering thereon in the bankruptcy proceeding of the bankrupt herein; to sell same and to distribute the proceeds of said sale in the payments of claims arising in the administration of said estate according to law.” It was determined that the letter of June 15, 1928, “was delivered to the bankrupt rescinding said partnersMp agreement of August 19, 1927,” and “that by reason of the letter of rescission as aforesaid, the partnership of the bankrupt and Arvid Pearson was dissolved, and that at the time the petition in bankruptcy was filed by the bankrupt herein, Arvid Pearson was not a member of a copartnership composed of the bankrupt and Arvid Pearson. * * * That at the time of the filing of the petition in bankruptcy herein the bankrupt was the surviving partner of said copartnership and that at the time of the filing of the petition in bankruptcy, said bankrupt, surviving partner, was entitled to the possession of the partnersMp assets. * * * That Arvid Pearson and A. J. Hennessy, or either of them, have no right, title, interest, claim or lien on-said partnersMp assets, to wit, the said boat ‘Saxon’, except as general unsecured creditors of said bankrupt, if at all.” .

Appellants filed a petition for review, and the referee made a certificate on such petition certifying that no witnesses were examined in the matter; that the evidence consisted solely of the partnership agreement and the letter of rescission. The District Court denied the petition for review and affirmed the order of the referee. TMs appeal is taken from that order.

It appears from the opinion of the referep, referred to in Ms certificate on the petition for review, that he was of opinion that the effect of the letter of June 15, 1928, was to rescind the partnership agreement and vest complete title in the partnersMp property in the bankrupt, and that the appellant Pearson merely retained a claim against the bankrupt for the amount he had invested in the partnership. The Civil Code of California requires that in order to rescind a contract on the ground of fraud it is essential for the party rescinding to tender to the other party to the contract to be rescinded anything of value which he had received thereunder. Cal. Civ. Code, §§ 1689, 1691. This was not done by the appellant, who had acquired a one-tMrd interest in the vessel by the partnership contract. The notice was therefore ineffective as a notice of rescission. It did not operate under the law to terminate the contract. The appellant certainly did not intend to surrender Ms interest in the vessel without a repayment of the purchase price.

It appears from the opinion of the referee that he not only considered the effect of the notice of June 15, 1928, as a rescission of the contract of copartnership, but also treated it as an expression of the will of the appellant Pearson to terminate the partnership and concluded that under the provisions of section 2451 of the Civil Code of California, in force at the time the notice was given, the effect of the notice was to dissolve the copartnership. See, also, section 2450, Civ. Code. The referee concluded that as the partnership was dissolved on the 15th of June the trustee was entitled to the possession of the boat. The referee states his conclusion in his opinion as follows: “While the referee is of the opinion that the trustee is entitled to administer on the boat by reason of Pearson’s withdrawal from the partnership prior to Morgan’s adjudication, he is also of the opimon that Pearson’s notice of rescission sufficiently complied with the provisions of the Civil Code relating to rescissions of contracts.”

Assuming, as the referee held, that the letter of June 15.th was an expression of the will of Pearson that the copartnership terminate, although, it does not so state, it does not follow that the trustee in bankruptcy is entitled to the possession of the-partnership assets. A notice of dissolution by one partner to his copartner does dissolve the partnership but does not terminate a partnership relationship. It is still necessary for the affairs of the copartnership to be settled, and the statutes of California, in conformity with the general law upon that subject, provide that unless by consent of all the partners one or more of them are selected to liquidate its affairs, any member of a general copartnership may act in liquidation and for that purpose may dispose of the partnership property, collect its assets, and settle the claims against it. Cal. Civ. Code, §§ 2459, 2460, 2461. We think that appellant Pearson and the bankrupt were partners at the time of the filing of the petition in bankruptcy within the meaning of section 5, subdivision (h), of the Bankruptcy Act (30 Stat. 547, ch. 541, § 5), which authorizes the solvent partner to settle the partnership business. This view is somewhat strengthened by the fact that section 5, subdivision (a), 11 USCA § 23 (a), provides that a partnership, after its dissolution and before final settlement, may be adjudged a bankrupt. This court, in Holmes v. Baker & Hamilton, 160 F. 922, 923, had occasion to consider this subject. In that case C. H. Holmes claimed that he had severed his connection with the copartnership several months before the act of insolvency and that he transferred his in-1 terest in the partnership to Park and had severed his connection therewith. He claimed, therefore, that the firm having long ceased to exist, it could not have committed an act of bankruptcy. In answer to this contention, the court, in an opinion by Judge Gilbert, held that he was a party to the act of bankruptcy, stating: “The rule is well settled that, where assets or debts of a partnership remain after dissolution, the partnership is considered as subsisting as to its creditors until its property is subjected to the satisfaction of their claims. In re Crockett et al., 2 Ben. 514, Ped. Cas. No. 3,402; In re Poster, 3 Ben. 386, Fed. Cas. No. 4,962; In re Noonan, 3 Biss. 491, Ped. Cas. No. 10,292; In re Stowers et al., 1 Lowell, 528, Ped. Cas. No. 13,516; In re Hirsch et al. (D. C.) 97 P. 571. The bankruptcy act of July 1, 1898, c. 541, 30 Stat. 544 (U. S. Comp. St. 1901, p. 3418), in recognition of this rule, provides in section 5a that a partnership during the continuance of the partnership business or after its dissolution, and before the final settlement thereof, may be adjudged a bankrupt, and section 5c provides that the court of bankruptcy which has jurisdiction of one of the partners may have jurisdiction of all the partners and of the administration of the partnership and individual property. See In re L. Stein & Co., 127 F. 547, 62 C. C. A. 272. * * * It was an act of omission, the failure to discharge the levy of the execution, a duty which rested as much upon the appellant as upon any member of the firm. Notwithstanding the dissolution of the copartnership, it remained, as it was before, the appellant’s duty to see that the property of the copartnership was devoted to the payment of the partnership debts, as to which he had not been released.”

In Remington on Bankruptcy, § 2906, it is said: “A trustee in bankruptcy of an individual partner has no right to interfere with the firm assets without the consent of the partner in bankruptcy.” See, also, Mills v. J. H. Fisher & Co. (C. C. A.) 159 F. 897, 16 L. R. A. (N. S.) 656.

The boat in question being partnership property, Pearson, notwithstanding his letter of June 15, 1928, is entitled to the possession thereof for the purpose of liquidating the affairs of the partnership.

The order of the referee and of the District Court affirming that order will be reversed, and the ease remanded to the District Court, with instructions to referee to order the boat turned over to the appellant Pearson to be disposed of as an asset of the copartnership in liquidation of the affairs of the copartnership.


author: DENISON, Circuit Judge.

text:
    TOWLE et al. v. DONNELL et al.
    No. 5608.
    Circuit Court of Appeals, Sixth Circuit,
    April 17, 1931.

      H. B. Talley, of Murfreesboro, Tenn., for appellants.
    T. W. Schlater, Jr., of Nashville, Tenn. (Price, Schlater & Price, of Nashville, Tenn., on the brief), for appellees.
    Before DENISON and MOORMAN, Circuit Judges, and SIMONS, District Judge.
   DENISON, Circuit Judge.

Towle, a citizen of Nebraska, filed in the court below a bill in equity, seeking specific performance against Rucker and others; and eventually, specific performance being found impossible, he recovered.a judgment for damages; under Towle’s direction, Dillard, the United States marshal for the Middle District of Tennessee, levied an execution up on a farm in that district, known as the Jenkins farm, the title to which had been in Rucker’s name, but which he had conveyed to his daughter, Mrs. Donnell. The farm being advertised for sale under this execution, Mrs. Donnell and her husband, claiming to be the owners, filed this bill in the court below— being in form an independent suit — seeking an injunction against Towle and the marshal to prevent the sale, and asking to have the levy vacated as a cloud upon their title. Their bill alleged not only the fact of Mrs. Donnell’s ownership but that Rucker, her grantor, had never owned the beneficial title, so' as to make it subject to the claims of his creditors, and that certain creditors of Ruck-er had begun a suit in the proper chancery court of Tennessee, for the purpose of setting aside the conveyance from Rucker to Mrs. Donnell, as being fraudulent as against Rucker’s creditors; and that this had resulted in a decree in favor of Mrs. Donnell, confirming her title as against Rucker’s creditors. The court below, against objection promptly made, sustained the federal jurisdiction, in spite of the fact that plaintiffs and the marshal were citizens of Tennessee.

1. This was right. The case was, in substance, ancillary to the pending ease in which judgment had been obtained and execution issued and in which the jurisdiction, by virtue .of diverse citizenship, was clear. Any proceeding which sought to aid or to stay the execution was ancillary and invoked a vicarious jurisdiction.

The decisions are clear to this effect; and they are not escaped because the bill formally alleges that the marshal knew Mrs. Donnell owned the property and his levy was an abuse of process. Taking together the whole bill and the exhibits, they fairly indicate a controversy between Towle and Mrs. Donnell as to whether her title was subject to the' claims of Rucker’s creditors, and show that the marshal was acting, by color of his office, to enforce Towle’s contentions. Lumley v. Wabash R. Co. (C. C. A. 6) 76 F. 66. 69; Brun v. Mann (C. C. A. 8) 151 F. 145, 150, 12 L. R. A. (N. S.) 154; Lee Line v. Robinson (C. C. A. 6) 232 F. 417, 418.

2. Towle answered, presenting the very claim which the bill had indicated— Viz. that the farm was, as against his creditors, the property of Rucker — and asking a decree declaring the Rucker-Donnell deed to be fraudulent. Thereupon, plaintiffs, over objection, were allowed to file a reply. This was permissible under Equity Rule 31 (28 USCA § 723), if the answer could be treated as a counterclaim. Perhaps it should not have been so considered, but no harm was done by allowing the reply to be filed. It really only amplified the bill, by giving full particulars of the former case in the state court and by formally claiming that the controlling question had thereby become res judicata. Observing that if this claim were correct, a decree for plaintiffs in this ease would necessarily follow, the court made reference to a special master to ascertain and report the facts bearing on the existence of an adjudication which would control the present case. Upon the master’s findings of fact and reported testimony, the court sustained the theory of res judicata, and entered a final decree accordingly. If this practice was irregular, in that it tended to prevent taking all the issues up for review in one appeal at one time, it in no way prejudiced defendants in this case. If they desired to attack the state court proceedings as collusive, as they now intimate, there is no reason to suppose that the master, or the court, would have denied them that opportunity. They made no such request, but elected to stand on their view of the law.

3. When a conveyance by an insolvent debtor is thought to be fraudulent as against bis creditors and a creditors’ bill is filed and due proceedings had, which provide opportunity for all creditors to join, the suit is representative of the creditor class, and those creditors who do not join, as well as those who do, are bound by the decree. Freeman on Judgments (5th Ed.) 952, 954; Throckmorton v. Hickman (C. C. A. 3) 279 F. 196, 201, 202.

The records of the state court show that February 1, 1922, the First National Bank and the Stones River Bank filed their bill against Rucker, Mrs. Donnell, et al., alleging that they were creditors of Rucker, secured by mortgage upon certain ■ parcels of land and property, and asking foreclosure and a judgment against Rucker for the deficiency, alleging that the conveyance of the Jenkins farm by Rucker to his daughter was fraudulent as against creditors, and asking that this conveyance be set aside if it became necessary to resort to that property. This bill was not, in form, a general creditors’ bill, but to some extent approximated that character. To the suit thus- commenced the clerk gave upon his calendar the serial No. 939. Or; February 13, the Farmers’ Bank filed a bill in this same court which was, in form, a general-creditors’ bill, and which alleged, among, other things, the fraudulent conveyance to Mrs. Donnell of this Jenkins farm, and which prayed that the bill be sustained'as a general creditors’ bill in behalf of the plaintiff and all other creditors of Rucker, that all the creditors of Rucker be required to prosecute their claims’ against him in this cause, and which, in further and' greater detail, asked the relief appropriate to a general creditors’ bill. To this suit the clerk gave the calendar No. 961; and in this suit, on July 20, 1922, a decree was entered sustaining the bill as a general creditors’ bill, requiring all creditors to. come in and prove their elaims, enjoining all parties to all suits pending from proceeding therein, and allowing all creditors to file petitions in this cause, setting up their elaims.

On July 22, a decree was entered consolidating the First National Bank case and the Farmers’ Bank case and a certain other simi- ’ lar ease by another creditor. This order was entitled in the three cases; and, because it appeared that - all three eases involved the title to the Hoggatt farm (a parcel not conveyed to Mrs. Donnell), the order was that the cases be consolidated and considered and heard together, so that single pleadings could be filed in all three cases. Mrs. Donnell had already filed answer in the First National Bank case, alleging her status as a good faith purchaser, and asking by cross-bill that her title be quieted and confirmed as against Rucker’s creditors. ' Shortly after the consolidation, she filed an answer in the Farmers’ Bank case to the same general effect. While this was the situation, and on September 26, 1922, Towle began his suit in equity in the court below, asking specific performance of the contract made by Rucker and another, in connection with the carrying on of the Hoggatt farm, and asking damages if performance could not be had. He made defendants thereto, the First National Bank and the Stones River Bank, which had liens upon the Hoggatt farm. In October, these defendants answered, setting up in full the proceedings in the state eourt, and gave -notice of the existence of the three cases and of their consolidation, and that suits by all creditors had been enjoined excepting as petitions might be filed under the specified general creditors’ bill. Towle thereby received complete knowledge of the existing general creditors’ bill and of his right to join therein. Thereupon the other properties, which had not been deeded to Mrs. Donnell, were sold under proceedings in the consolidated cause; and, in the meantime, proofs had been taken upon, the issue of Mrs. Donnell’s title to the Jenkins farm, and in April, 1924, a decree was entered in the consolidated causes formally adjudicating that the conveyance from Rucker to Mrs. Donnell of the Jenkins farm was in good faith and free from fraud or any fraudulent intent. Thereupon the pending attachment and injunction were dissolved and the bill was dismissed. No appeal was taken. There is some irregularity, but we think only that, about this decree. The creditors’ bill which had been sustained as such before the consolidation was the Farmers’ Bank case No. 961. The First National Bank case, No. 939, had been consolidated with that. Plainly the character of general creditors’ bill abided in the consolidated ease. The decree of dismissal, dated April 15, 1924, is entitled in the First National Bank ease No. 941. This numbering is upon this record evidently a clerical error for “939,” because the decree proceeds to say that the answer and cross bills, which had come to a hearing, were filed in the Farmers’ Bank case No. 961, “consolidated with this cause and which answer and cross-bills axe hereby deemed as treated as filed herein.” We think it clear that this decree should be treated as the final decree in the general creditors’ case, and in favor of Mrs. Donnell; but if, by any chance, the issue pending in the general creditors’ bill remained in the Farmers’ Bank case, it appears this case, for some reason treated separately, had also shortly before been dismissed by final decree, finding the issue in Mrs. Donnell’s favor.

The court below was right in holding that no opportunity remained for Towle to attack this conveyance, and that he was bound by the decree in the state court.

The decree is therefore affirmed.


author: FOSTER, Circuit Judge. HUTCHESON, Circuit Judge

text:
    UNITED STATES v. BUTLER.
    No. 5876.
    Circuit Court of Appeals, Fifth Circuit.
    April 17, 1931.
    W. P. Hughes, U. S. Atty., of Jacksonville, Fla., Raymond F. Brown,' Sp. Atty., Bureau of Internal Revenue, of Miami, Fla., and Eugene E. Angevine, Bureau of Internal Revenue, of Washington, D. C., for the United States.
    J. Turner Butler and J. Robert Sherrod, both of Washington, D. C., for appellee.
    Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.
   FOSTER, Circuit Judge.

, Appellee sued to recover income taxes amounting to about $2,000, which had been assessed on compensation received by him as attorney for Duval county, Fla., for the years 1919, 1920, 1921, and 1922, paid under protest. From an adverse judgment the United States appeals.

The findings of fact of the District Court are not objected to. The. following material facts appear from the record: Appellee was employed February 4, 1919, by the board of commissioners of Duval county, Fla., to represent it as its legal advisor. His term was to run as long as his services were satisfactory, and it extended through the year 1922, until the then hoard went out of office. His salary was fixed by resolutions of the board and covered compensation for attendance at all meetings of the board, preparation of resolutions and contracts, legal advice, and services in litigated matters of an ordinary nature. He was carried on the" pay roll of the board and was paid his salary monthly. In addition he was allowed extra .compensation for services in connection with certain litigated cases and bond issues. During the entire period of his employment he was continuously under the direction and control of the board. He frequently advised with and received instruction from them. He was employed to represent the county in all matters of a legal nature and was expected, without express orders from the board, to represent and defend the county in all such matters. He was not employed in each particular instance. He maintained his private law office but devoted 75 per cent, of his time to attending to his duties as attorney for the board, which he did not allow his private practice to interfere with.

This case is identical as to its facts with the case presented in Blair v. Mathews, 29 F.(2d) 892, in which we held in favor of the taxpayer. However, the government relies upon the leading ease of Metcalf & Eddy v. Mitchell, 269 U. S. 514, 46 S. Ct. 172, 70 L. Ed. 384, and subsequent decisions, applying the principles announced in that case to various other combinations of facts.

We may assume that under the ruling in the Metealf & Eddy Case that appellee was not an officer, -as his position was not created by express statute, he did not take an oath, and his tenure of office, emoluments, and duties were not fixed by law. We may also pass without decision the question as to whether the tax upon his compensation was an interference with the governmental functions of the board of commissioners. The question therefore presented for decision is whether appellee was an employee of a political subdivision of a state and whether as such his compensation was exempt from taxation, under the provisions of section 1211 of the Revenue Act of 1926 (26 USCA § 1065 b), and similar taxing statutes. The decision of this questipn depends upon whether the facts in the case at bar are so similar to those appearing in the Metealf & Eddy Case as to require a reversal.

In the Metealf & Eddy Case it was held that they were independent contractors and not either officers or employees. The opinion does not review the facts in detail but the following clearly appears: Metealf and Eddy were consulting engineers. They were employed by various subdivisions of different states under contracts for their services in connection with particular projects. None of their engagements was for work of a continuous character. Their compensation was fixed by their contracts for each separate project. They were at liberty to engage in other concurrent employment. They were expected to use their judgment and skill in doing their work and were not subject to the control of the- subdivisions employing them.

Except that appellee was required to use his judgment and skill as a lawyer in serving the board, there is no similarity between his employment and that of Metealf and Eddy. Unlike Metcalf and Eddy, he was continuously employed by one political subdivision to render any and all legal services that might be required. The board of commissioners had first call upon his services and the right to demand and use all his time. He was not at liberty to take other employment if his services were required by the board. That he indulged to some extent in private practice is immaterial. ' It is quite usual for attorneys-occupying a public position to engage in private practice if time and opportunity permit. It is also immaterial that he was allowed extra fees for certain services. That was merely a method of measuring his compensation.

The government also relies upon the case of Howard v. Commissioner (C. C.) 29 F. (2d) 895, reversed on the authority of Metcalf & Eddy v. Mitchell, 269 U. S. 526, 46 S. Ct. 172, 70 L. Ed. 384. In that ease we did not consider whether Howard was an officer or an employee of a political subdivision of the state of Texas. He had been employed in four separate suits by cities in Texas, and we held that in representing them he was exercising governmental functions as their agent which were in no sense remote. That ease may be differentiated the same as the Metcalf & Eddy Case.

The conclusion reached on the facts iq this case is that appellee was an employee of a political subdivision of the state of Florida within the meaning of the statute and his compensation as such was exempt from federal income taxes.

Affirmed.

HUTCHESON, Circuit Judge

(concurring).

That appellee was an employee of Duval county as to the regular routine work covered by and performed under tbe resolution of tbe board of county commissioners fixing tbe salary of the county attorney, and that his regular monthly compensation for the duties of such employment was exempt from taxation as moneys received as such employee, I think there can be no doubt.

In law the word “employee” is chameleon-like; it takes color and meaning not only from the words with which it is associated, but from the subject-matter with which the statute or order in which it is found is concerned. 15 Cyc. 1032, 1033; Campfield v. Lang (C. C.) 25 F. 128; Millers’ Indemnity Underwriters v. Cook (Tex. Civ. App.) 229 S. W. 598; Gay v. Hudson River (C. C.) 178 F. 499, 500; Gurney v. Atl. Ry. Co., 58 N. Y. 358; Latta v. Lonsdale (C. C. A.) 107 F. 585, 52 L. R. A. 479.

While it is true that it is most often used of those employed in less important positions in contradistinction to officers, managers, superintendents etc., it is also true that where the purpose of the statute under investigation requires it, it has a fuller and broader meaning, and will include persons employed in practically every grade, so that the nature of the work performed is no longer a distinguishing mark of an employee. Shields v. Grace, 91 Or. 187, 179 P. 265, 270; Smith v. Bowersock, 95 Kan. 96, 147 P. 1118, 1121; Clark v. New England Tel. Co., 231 Mass. 546, 121 N. E. 497; Burnap v. U. S., 252 U. S. 518, 40 S. Ct. 374, 64 L. Ed. 692.

For at common law, and unless controlled by the context, the subject-matter or the purpose of the statute, whether one who works or performs service for another is an employee is not determined by the rank or importance of the position which he holds, or the character of service rendered, and the term many include attorneys, physicians, etc., whether privately or publicly employed. Gurney v. Atlantic Ry. Co., 58 N. Y. 358; Cyc. 15, p. 1032-1033; Fisher v. City of Mechanicville, 225 N. Y. 210, 121 N. E. 764, 765 (attorney employed by a village on a small yearly salary).

Nor does the question whether one is an employee or a contractor depend upon the nature of the work performed, or the character of the person performing it; rather it is determined by the conditions under which the work is performed; that is, whether it has regularity and continuity, and is performed under the control and direction, though general, of the employer. If the employment .is for a single act, or for a series of isolated acts the employment being specific as to each act, the person employed, whether an attorney in legal matters or a layman in others, is not an employee, but an independent contractor. Hand v. Cook, 29 Nev. 518, 92 P. 3; Clark v. Renninger, 89 Md. 66, 42 A. 928, 44 L. R. A. 413; Louisville, E. & St. L. R. Co. v. Wilson, 138 U. S. 505, 11 S. Ct. 405, 407, 34 L. Ed. 1023.

Perhaps the best statement of the distinction is found in the Wilson Case, supra, where it is said: “The terms ‘officers’ and ‘employees’ both alike refer to those in regular and continual service. Within the ordinary acceptation of the terms, one who is engaged to render service in a particular transaction is neither an officer nor an employee. They imply continuity of service, and exclude those employed for a special and single transaction.”

The facts established and found in this ease are that appellee was both regularly and continuously employed, and that this work was performed by him under the general direction and control of his employer, the board of county commissioners. Vane v. Newcombe, 132 U. S. 233, 10 S. Ct. 60, 33 L. Ed. 310; R. R. v. Wilson, 138 U. S. 505, 11 S. Ct. 405, 34 L. Ed. 1023.

There is some insistence by the govern-' ment upon the authority of Blair v. Byers (C. C. A.) 35 F.(2d) 326, Kreipke v. Commissioner (C. C. A.) 32 F.(2d) 594, 596, and Burnet v. McDonough (8 C. C. A.) 46 F.(2d) 944, that since -appellee was employed as an attorney to do work in which he was specially skilled, and in regard to the manner and method of the performance of which he must have been left to his own devices, and because his full time was not taken up by the county employment, and continuing his private office he was allowed to and did have other clients, it must be held that he was not an employee, because not a full-time one, and because not subject to direction and control as to the details of the work to he performed.

Upon the first point I think it plain that since nowhere in the statute authorizing the deduction of compensation received as an employee of the state or its subdivisions is there any requirement that an employee shall give his full time, that whether he gives his full time or not has no legal and little evidentiary significance as a test. But if it has any, appellee has satisfied it here, for he was obligated to the county to give all the time necessary to accomplish the tasks which they required of him, and could take no other business except in spare time, and he did in fact give 75% of his time to the county. Maryland Casualty Co. v. Kent (Tex. Com. App.) 3 S.W.(2d) 414; R. R. Co. v. Hanning, 15 Wall. 656, 21 L. Ed. 220.

Upon the second point, the test of control, it is perfectly plain that it is satisfied in the matter of the services of a professional character rendered by lawyers and physicians, by a general employment to perform the work of the state or county as it comes up in the way and manner which the professional skill of the employee dictates to him; and that if the test of control as applied to the employment of professional men having particular skill, like lawyers, demands more than that control which is implied from the relation of employer and employee created by a contract of employment for regular and continuing services on a monthly salary, it must be rejected..

However, in this case, the test of control is satisfied in the strictest-way by the stipulation and the findings that “during the entire period of employment plaintiff was continuously under the direction and control of the County Commissioners.”

As to that part of the compensation paid appellee over and above his salary under the last paragraph of the resolution: “Said salary shall not cover representation in litigated cases nor work necessarily done in connection with the issuing of county bonds, payment for all such representation and work not covered by salary as above mentioned to be made at a reasonable price to be agreed upon between the Board of County Commissioners and its ,said attorney,” I think the matter stands differently; that such payments were not received by appellee as an employee, but as an agent of the county; and that he is not entitled to deduct as an employee of the county the sums so received.

There is much to be said for the view expressed in the majority opinion that though these sums were not paid in a regular and continuous way, but accrued to him from isolated transactions having no sequential connection with each other, all of them flowed to him as a result and as part of his contract and status as employee. That they represented not sums paid upon individual and separate contracts, but upon the one contract of employment, and as part of the general compensation therein provided for, the only matters not fixed by that contract being not the employment, but the compensation for it, which was to be fixed and measured as the necessity for the rendition of the services arose. That it is not essential to the relation of employee that payment be made on a regular basis. Maryland Casualty Co. v. Kent (Tex. Com. App.) 3 S.W. (2d) 414; R. R. Co. v. Hanning, 15 Wall. 649, 21 L. Ed. 220; Shannon v. Western Indem. Co. (Tex. Com. App.) 257 S. W. 522.

With the principle announced I fully agree, and it is only because I do not so interpret the contract that I find myself unable to .agree to its application here. It seems to me that the contract had only the effect to exclude from the duties which plaintiff as an employee assumed those special matters referred to in it as excluded, and that these matters were made the subject of special agreements from time to time as they arose.

It does not follow, however, that the moneys so received were taxable. On the contrary, I think it perfectly plain that these sums are no more taxable than those received by him as employee, for they, just as the sums which he got by way of monthly salary, were paid to and received by him as an agency of the board of county commissioners for discharging for them their general duties imposed by the statutes of Florida, and taxation imposed upon sums so received would be “to affect a governmental agency in such manner -as directly to interfere with the functions of government.” Metcalf & Eddy v. Mitchell, 269 U. S. 514, 46 S. Ct. 172, 70 L. Ed. 384; Blair v. Mathews (C. C. A.) 29 F.(2d) 892, 894; Panhandle Oil Co. v. Mississippi, 277 U. S. 218, 48 S. Ct. 451, 72 L. Ed. 857, 56 A. L. R. 583.

The statutes of Florida in force at the time appellee was employed provided, section 2153, Compiled General Laws of Florida 1927, under “Powers and duties,” that: “The board of county commissioners of each county shall have power, at any legal meeting, to elect one of their number chairman, and to make such orders concerning the care of and the improvement of the corporate property of the county as may be deemed expedient, and also * * * To represent the county in the prosecution and defense of all legal causes. * * * To issue bonds in their respective counties [etc.] *^ * * To perform all other acts and duties that may be authorized by law.”

Under these statutes the Supreme Court of Florida has held: (1) That in the absence of fraud the county commissioners have wide discretion in exercising the authority conferred on them by statute, Bowden v. Ricker, 70 Fla. 154, 69 So. 694; (2) county commissioners are constitutional officers, and their powers and duties have been fixed and-prescribed by the Legislature, State v. Walton County, 93 Fla. 796, 112 So. 630. While in Keggin v. Hillsborough County, 71 Fla. 356, 71 So. 372, in a full and considered opinion the Supreme Court of Florida has declared: “A county is a political subdivision of the state. * * * It is not a corporation; * * * it is created for administrative purposes. * * * It is purely political, in character; its functions are of a public nature, constituting the machinery and essential agency by and through which many of the powers of the state are exercised.”

The county commissioners had under the laws of Florida power and authority to discharge either in person or through employees, and or agents, duties thus imposed, including those to which the last clause of the employment resolution had particular reference, “To represent the county in the prosecution and defense of all legal cases, to issue bonds in their respective counties,” etc. They elected to discharge some of these duties in person, some through .appellee, the county attorney, as an employee upon a regular monthly salary, and some through appellee, the county attorney, as an agent specially compensated in each matter as it arose. In each of these instances the duties were performed by one having an intimate, official, and functional relation to the county, and being in law and in fact an agency and instrumentality through which the county, a political subdivision of the state, performed its governmental powers.

It is generally acknowledged that just as the state may not subject the federal government indirectly to the burden of state taxation by laying a tax upon the business which it does with, or the moneys which it pays to, an agency seléeted by it for the exertion of its constitutional powers, McCulloch v. Maryland, 4 Wheat. 316, 4 L. Ed. 579; Panhandle Oil Co. v. Mississippi, 277 U. S. 219, 48 S. Ct. 451, 72 L. Ed. 857, 56 A. L. R. 583, the federal government may not, through the indirect means of an income tax upon moneys paid to an agent of its selection, tax a sovereign state, Metcalf & Eddy v. Mitchell, 269 U. S. 521, 46 S. Ct. 172, 70 L. Ed. 384, and cases cited.

Here agencies and activities not remote and detached from, but so connected with, in fact, so intimate to the very official life and being of the county, are in ■ question as that to burden them with taxation is in effect to tax the state itself. Under these circumstances, the effort to tax must fail, for the power to tax, which is the power to destroy, may be exercised neither by the state against the federal government, nor by the federal government against the state. Each as to the other is sovereign, and each has immunity from the other’s taxing power.


author: NORTHCOTT, Circuit Judge.

text:
    MERCHANTS’ TRANSFER & STORAGE CO. v. BURNET, Com’r of Internal Revenue.
    No. 3050.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.

      Robert A. Littleton, of Washington, D. C. (Mason, Spalding & McAtee, of Washington, D. C., on the brief), for petitioner.
    J. P. Jackson, Sp. Asst, to Atty. Gen. (G. A. Toungqnist, Asst. Atty. Gen., Sewall Key and J. Louis Monarch, Sp. Assts. to Atty. Gen.,' and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and De Witt M. Evans, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief), for respondent.
    Before PARKER and NORTHCOTT, Circuit Judges, and GLENN, District Judge.
   NORTHCOTT, Circuit Judge.

This is a petition by the Merchants’ Transfer & Storage Company, a corporation under the laws of the state of Delaware, with its principal office and place of business in Washington, D. C., to review a decision of the United States Board of Tax Appeals. The first assignment of error dealt with the question whether the board erred in holding that the deficiency in the tax for 1917, as determined by the Commissioner, was not barred by the Statute of Limitation. Since the bringing of this appeal this question has been settled by the Supreme Court of the United States in the cases of Stange v. United States, 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed.-, and Brown & Sons Lumber Co. v. Burnet, Commissioner of Internal Revenue, 282 U. S. 283, 51 S. Ct. 140, 75 L. Ed. -, both decided January 5, 1931, and the point raised by this assignment of error was not urged before us.

The second question raised is that the board erred in holding that the petitioner was not entitled to the allowance of a deduction for amortization-of the cost of the erection of a building by petitioner in Washington, subsequent to April 6, 1917, and used by the government of the United States as a facility for the production of articles contributing to the prosecution of the war, and that the findings of fact by the board, in reference to the right of petitioner for such allowance, are not supported by any evidence, and are contrary to the evidence given in the hearing before the board.

The petitioner operated a transfer and storage business in the city of Washington, and in this business used a number of automobiles. In August, 1917, petitioner needing additional garage facilities, entered into a contract' for the construction of a reinforee'd concrete type garage building, three stories in height, provision in foundation for an additional three stories, and the evidence showed that petitioner had gotten estimates as to the cost of carrying the building to three or four extra stories. When petitioner started the erection of the building, representatives of the government of the United States approached officers of the petitioner with a view to getting them to construct a six-story building that would be suitable for the purposes of the government in the production of articles contributing to the prosecution of the war. In November, 1917, the three-story building, originally contracted for, was about completed, and because of the negotiations of the government of the United States, it was decided by petitioner’s officers to add three additional stories, making the building a six-story building. The original three stories were constructed for use as a garage building; the additional three stories being of a factory type.

The War Department of the United States Government took possession of the building in January or February, 1918, and occupied the same, with the Field Ordnance Department, for the purpose of assembling traveling machine shops to be used in construction and repair work in the various cantonments, where soldiers were being trained. The six-story building was completed in April, 1918, and at that time the government had leased said building at the rate extremely remunerative to the petitioner as compared to the cost of the building. The government continued in possession of said six-story building, using it for various purposes in connection with the prosecution of the war, until the early part of the year 1920. The cost of the building was $89,407.42, and the rental, originally agreed to be paid by the government, was $33,750 per annum, and although the rental was shortly reduced, the petitioner profited by the rent collected in the time the government had the building under lease to an amount equal to more than half of the cost of the construction of the building.

The Commissioner of Internal Revenue found that the petitioner was not entitled to any deduction for amortization, and the Board of Tax Appeals sustained the finding of the commissioner.

Section 234 (a) (8) of the Revenue Act of 1918 (40 Stat. 1057,1077, c. 18) provides as follows:

“(a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions : * * •

“«(8) In the ease of buildings, machinery, equipment, or other facilities, constructed, erected, installed, or acquired, on or after April 6, 1917, for the production of articles contributing to the prosecution .of the present war, and in the ease of vessels construct-, ed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the present war, there shall be allowed a reasonable deduction for the amortization of such part of the cost of such facilities or vessels as has been borne by the taxpayer, but not again including any amount otherwise allowed under this title or previous Acts of Congress as a deduction in computing net income. At any time within three years after the termination of the present war the Commissioner may, and at the request of the taxpayer shall, reexamine the return, and if he then finds as a result of an appraisal or from other evidence that the deduction originally allowed was incorrect, the taxes imposed by this title and by Title III for the year or years affected shall be redetermined and the amount of tax due upon such redetermination, if any, shall be paid upon notice and demand by the collector, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of section 252.”

The evidence before the board shows that officers of the petitioner contemplated an erection of a six-story building for their use in the business of petitioner before the government entered into negotiations with regard to leasing. This is shown by the securing of the estimates of the cost of constructing a six-story building, and on March 19, 1918, while negotiations for the lease for the government was under way, the following resolution was passed by the board of directors of petitioner:

“Resolved: That although to deprive the Company of the use of the new building for the purposes for which it was constructed would interfere with the economical operation of the new business and entail substantial loss to the Company, the President is hereby authorized to rent the new six-story fireproof building, rear 920-922 E Street, N. W. to the Ordnance Department of the War Department on the following terms:
“The rental to be at the rate of $33,750.00 per annum.
“The operation of the building to be at the expense of the United States Government.
“The taxes and insurance to be paid by the Merchants Transfer & Storage Company.
“Any alterations, changes, etc., if needed, to be made at the expense of the Government.
“The lease is to be effective from April 1, 1918, to June 30, 1918, with the privilege of renewal at the same rate for a further period of ‘one or two years.”

The burden devolves upon the petitioner to show that the decision of the Commissioner of Internal Revenue was erroneous, as the legal presumption is in favor of the correctness of the commissioner’s action. Guarantee Bond & Mortgage Co. v. Commissioner of Internal Revenue (C. C. A.) 44 F.(2d) 297, and cases there cited; Burnet, Commissioner, v. Sanford & Brooks, 282 U. S. 359, 51 S. Ct. 150, 75 L. Ed.-, decided by U. S. Supreme Court, January.5, 1931.

That the finding of the Commissioner is prima facie correct has been held by this court in a number of instances. Anchor Co., Inc., v. Commissioner of Internal Revenue (C. C. A.) 42 F.(2d) 99; and eases there cited. See, also, Brooks v. Commissioner of Internal Revenue (C. C. A.) 35 F.(2d) 178.

Moreover, it is well settled that findings of the Board of Tax Appeals, supported by evidence, will not be disturbed on appeal. We know of no contrary authority on this proposition, and this finding has been repeatedly made by this court. Ox Fibre Brush Co. v. Blair, Commissioner of Internal Revenue (C. C. A.) 32 F.(2d) 42, 68 A. L. R. 696; Atlantic Coast Distributors v. Commissioner of Internal Revenue (C. C. A.) 33 F.(2d) 733; Guy v. Commissioner of Internal Revenue (C. C. A.) 35 F.(2d) 139; Anchor Co., Inc., v. Commissioner of Internal Revenue (C. C. A.) 42 F. (2d) 99.

In appeals from the decision of the Board of Tax Appeals the courts are limited to a review of the questions of law where there is substantial evidence to sustain the findings of fact. Lucas, Commissioner, v. Mercantile Trust Co. (C. C. A.) 43 F.(2d) 39, and cases there cited.

The record shows that petitioner entered upon the construction of the building •in question for use in its own business, and the resolution of petitioner’s board after the building was practically constructed supports this theory, and while the petitioner may have been induced to alter the plans with respect to the building in some degree. such change in the plans was evidently for the purpose of securing a profitable contract of lease from the government. The petitioner has not sustained the burden of showing that the action of the commissioner was erroneous, and no matter what would have been our conclusion upon the evidence before the Board of Tax Appeals, there' was unquestionably substantial evidence to support the finding of fact, by the board, that, the building was not constructed for the production of articles contributing to the prosecution of the war.

It therefore follows that the aetion of the Board of Tax Appeals is affirmed.


author: WILLIAM C. COLEMAN, District Judge.

text:
    BURNET, Com’r of Internal Revenue, v. MOORE COTTON MILLS CO.
    No. 3052.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.
    William Cutler Thompson, Sp. Asst, to Atty. Gen. (G. A. Youngquist, Asst. Atty. Gen., Sewall Key and J. P. Jackson, Sp. Assts. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Dean P. Kimball, both of Washington, D. C., on the brief), for petitioner.
    James Craig Peacock, of Washington, D. C. (John W. Townsend, of Washington, D. C., on the brief), for respondent.
    Before NORTHCOTT, Circuit Judge, and MeCLINTIC and COLEMAN, District Judges.
   WILLIAM C. COLEMAN, District Judge.

The question here presented, which arises upon a petition to review the action of the Board of Tax Appeals, is whether, under the Revenue Act of 1921, § 204 (b), (42 Stat. 227, 231), in determining the net income of a tax payer for the second succeeding year following a net loss, for the purpose of applying the $2,000 credit provision of section 236 (b) of the same act, the unapplied balance of the net loss is to be treated as a deduction in computing such net income, or whether it is available only as a credit to be applied against such net income.

The sections of the Revenue Act of 1921 above referred to are the following:

“See. 204. * * * (b) If for any taxable year beginning after December 31, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net ineome of the taxpayer for the succeeding taxable year; and if such net loss is in excess of the net income for such succeeding taxable year, the amount of such excess shall be allowed as a deduction in computing the net ineome for the next succeeding taxable year; the deduction in all cases to be made under regulations prescribed by the Commissioner with the approval of the Secretary.”

“Sec. 236. That for the purpose only of the tax imposed-by section 230 [the tax on corporate ineome] there shall be allowed the following credits: * * *

“(b) In the case of a domestic corporation the net ineome of which is $25,000 or less, a specific credit of $2,000; but if the net income is more than $25,0.00 the tax imposed by section 230 shall not exceed the tax which would be payable if the $2,000 credit were allowed, plus the amount of the net ineome in excess of $25,000. * * * ”

The Board of Tax Appeals found the following facts, concerning which there is no dispute: The taxpayer is a corporation with principal offices at Lenoir, 1ST. C. The taxpayer suffered a net loss of $21,321.08 in 1921. In 1922 it had a taxable net income of $2,368.45, which was offset by an equal amount of its net loss in 1921. In 1923, its taxable net ineome (as corrected by the Commissioner of Internal Revenue) was determined to be $28,522.25, against which .the commissioner treated the unapplied remainder of the net loss for 1921, that is $18,952.63, merely as a credit. The taxpayer, however, contended that in computing its taxable ineome for 1923 this item must be deducted from its gross ineome before its net income could be determined in accordance with the provisions of the law; that the net ineome so determined was $9,569.62, and since that amount was less -than $25,000-, it was entitled to the specific credit of $2,000, as provided in section 236 (b) of the Revenue Act of 1921.

The Commissioner of Internal Revenue having denied the taxpayer the benefit of such deduction, a deficiency of $243.59' resulted. Upon petition for redetermination, the Board of Tax Appeals reversed the commissioner, and entered ' judgment for the taxpayer, holding that there was an overpayment for the year 1923 in the amount of $6.41. From this decision the commissioner petitioned for review.

A distinct difference is to be noted in the language employed in section 204' (b) in applying the net loss to the net-ineome for “the succeeding taxable year,” and in applying it to the net ineome for “the next succeeding taxable year.” That is to say, for the second year, the law provides that such loss “shall be deducted from the net income of the taxpayer,” whereas, for the third year the law provides that any excess of the loss remaining after it has been applied against the net ineome of the second year “shall be allowed as a deduction in computing the net income for the next succeeding [the third] taxable year.” The Commissioner of Internal Revenue has interpreted this language to mean that with relation to both the second and third year’s net ineome, merely a credit of the prior net loss is to be allowed, and not a deduction, with the result that in the present ease respondent is thereby denied the benefit of the specific credit provision of section- 236 (c). See Treasury Department Regulations 62, article 1602, although it appears that under a similar provision of the Revenue Act of 1918 (40 Stat. 1061), the regulation was to the contrary (Treasury Dept. Regulations 45, article 1603).

The Board of Tax Appeals has consistently followed the position now taken by the commissioner with respect to the second tax-, able year’s ineome, Chicago Nat. C. v. Commissioner, 5 B. T. A. 614; Appeal of S. W. Bridges & Co., 4 B. T. A. 750; Oak Grove & Georgetown R. R. Co. v. Commissioner, 6 B. T. A. 661; Alderman, Fairchild Co. et al. v. Commissioner, 17 B. T. A. 390; and this the taxpayer does not dispute. But with the commissioner’s interpretation with respect to the third taxable year’s income,' the Board of Tax Appeals refused to agree,, saying: “We find no ambiguity in either the first part or in any part of section 204 (b) of the Act of 1921. On the contrary, its provisions seem to us to be as clearly specific and unmistakable as it is possible to express them. Without doubt the Commissioner is endowed with the power to "make and enforce regulations that shall carry out the clear intent of the words of this section, but equally the power given in the section does not imply that he has any authority to make or enforce any regulation that alters, or even modifies, that clear intent, and it would be without effect even though that were the implication. The power of Federal legislation lies solely in Congress, and in our opinion that part of the regulation of the Commissioner which we have italicized and which provides that the excess of the net loss over the net income of the second year ‘shall be carried over and credited against the net income for the next succeeding (third) taxable year’ where Congress has clearly provided that ‘the amount of such excess shall be allowed as a> deduction in computing the net income for the next succeeding taxable year/ is an erroneous construction of that Act and goes beyond the power delegated to the Commissioner. We do not know whether it was the intent of Congress to provide that the deductions permitted, under certain circumstances, for the second and third years should be similarly applied; but we do know that such is not the effect of the language used in section 204 (b) of the Revenue Act of 1921; and that it is not within the power of the Commissioner so to construe and apply the widely differing provisions therein contained. The- rule has been so well settled that it seems unnecessary further to discuss it or to cite authorities.

“In what we have said above, we are not unmindful that the conclusion we reach differs from our decision in Eastern Building Corporation v. Commissioner of Internal Revenue, 16 B. T. A. 138. There was no appearance for the petitioner in that case. The distinction now made in the language of the Act was not then pointed out. The decision in the Eastern Building Corporation Case, supra, is overruled.

“We find in the instant case that the petitioner’s net income for 1923 was less than $25,000, and that it is therefore entitled to the specific credit of $2,000'under the provisions of section 236 (b) of the Revenue Act of 1921.”

We believe the above conclusion of the board, and the reasoning upon which it is based, to be sound, and feel that little need be added to what the board has said. We are not unmindful of the firmly established principle of statutory construction that, in the event of a literal construction of an act of Congress leading to a result grossly absurd, such construction shall yield to the reasonable intent. Crooks v. Harrelson, 282 U. S. 55, 51 S. Ct. 49, 75 L. Ed.-. But we do not concede that there is in fact any real ambiguity, much less that the result here produced is absurd, albeit there may be no sound reason for saying that while net loss shall not be an item in the computation of net income for the first succeeding year, it shall be in the computation of net income for the second succeeding year. Whatever the undisclosed reason, the statute does make the distinction by the very language employed. It thus seems to us that there is scarcely more justification for torturing the language of one clause in the statute than for doing the same thing with respect to the other clause. That is to say, it would appear to be about as logical to contend that uniformity should be produced by construing the statute so as to allow deductions with respect to both years, as by construing it so as to allow merely credits for both years.

We are also not unmindful of the well-established doctrine that regulations made by the Commissioner of Internal Revenue, in respect to the assessment and collection of taxes, have the force and effect of statutes, if made with the approval of the Secretary of the Treasury, and pursuant to statutory authority. Maryland Casualty Co. v. United States, 251 U. S. 342, 40 S. Ct. 155, 64 ,L. Ed. 297; Brewster v. Gage, 280 U. S. 327, 50 S. Ct. 115, 74 L. Ed. 457. But in the present instance, we believe that the commissioner exceeded his authority under the statute^ Also, should we assume ambiguity to exist in the phraseology, in construing a tax statute of this kind, any such ambiguity should be resolved in favor of the taxpayer. Gould v. Gould, 245 U. S. 151, 38 S. Ct. 53, 62 L. Ed. 211; U. S. v. Merriam, 263 U. S. 179, 44 S. Ct. 69, 68 L. Ed. 240, 29 A. L. R. 1547; Reineeke v. Trust Co., 278 U. S. 339, 49 S. Ct. 123, 73 L. Ed. 410, 66 A. L. R. 397.

Lastly, if further support were needed for the conclusion here adopted, it is to be found in the form in which section 204 (b) of the Act of 1921 was redrafted in the Act of 1924 (section 206 (b), and carried into each subsequent act. That redraft is as follows: “If, for any taxable year, it appears upon the production of evidence satisfactory to the commissioner that any taxpayer has sustained a net loss, the amount thereof shall be allowed as a deduction in computing the net income of the taxpayer for the succeeding taxable year (hereinafter in this section called ‘second year1) and if such net loss is in excess of such net income (computed without such deduction), the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year (hereinafter in this section called 'third year’) ; the deduction in all eases to he made under regulations prescribed by the commissioner with the approval of the Secretary.” (43 Stat. 260 and 44 Stat. 17 [26 USCA § 937 (b)]; section 117 (b), 45 Stat. 825 [26 USCA § 2117 (b)]).

As a result of this redrafting, the Treasury Department has redrafted its Regulations and has ever since construed section 204 (b), as thus amended, to allow the net loss to be treated as a deduction, in computing the net income for both the second and third years. See Regulations 65, article 1622; Regulad tions 69, article 1622; Regulations 74, article 652. Since the amendment incorporated, with respect to the application of the net loss to both the second and third years, the same language that was used in the 1921 act with respect to the application of the net loss to the third year, and since thereafter the Treasury Department has applied exclusively the rule here contended for by the taxpayer, the commissioner’s present position is at least inconsistent and without persuasive force.

. For the aforegoing reasons, we find no error in the decision of the Board of Tax Appeals, and the same is accordingly affirmed.


text:
    NORRIS et al. v. NEW YORK LIFE INS. CO.
    No. 3088.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.
    Lewis W. Lake, of Baltimore, Md., for appellants. .
    John T. Tucker, of Baltimore, Md. (Keech, Deming & Carman, of Baltimore, Md., on the brief), for appellee.
    Before PARKER and NORTHCOTT, Circuit Judges, and WEBB, District Judge.
   NORTHCOTT, Circuit Judge.

This is an action at law, brought by appellants, who will be here referred to as plaintiffs, against appellee, referred to herein as defendant, brought in the court of common pleas of Baltimore city, Md., and removed to the District Court of the United States for the District of Maryland. The action was brought upon insurance policies issued by defendant on the life of James J. Norris, in the sum of $25,000, with clauses providing for a payment equal to a double amount of the face of the policy for death in case of accident. On trial at the conclusion of the evidence for the plaintiff, on motion of attorney for the defendant, the trial judge directed a verdict for the defendant, upon which verdiet judgment was entered, and from which action of the court this appeal was prosecuted. No evidence was offered on behalf of the defendant.

The insured owned a farm on the Patuxent river, and conducted a store thereon, and an adjoining farm was owned by the brother of the deceased, one J. Walter Norris, a public road dividing the two farms. In October, 1929, insured’s son and a man, who was forking for the insured, together with a colored man, left the insured’s store in a truck. As the truck approached Walter Norris’ place, he (Walter Norris) came out of the house and hailed the truck. After the truck stopped, Walter Norris accused the employee of the insured, a man named Golds-borough, of telling a lie on him, which Golds-borough denied. During the altercation which followed, Goldsborough started to get out of the truck, when Walter Norris pointed a pistol at him. The evidence showed that Walter Norris was under the influence of intoxicants. When Walter Norris pointed the pistol at Goldsborough, the insured, having ' followed the truck up the road, approached his brother Walter, and told him to, put the gun down, that he was not, going to sho.ot anybody. Walter Norris, with the pistol in his hand and down by his side, started to walk backwards toward his house, where insured followed him. After they got inside the house, in some way the pistol was fired and the insured was instantly killed.

The double indemnity clause of the policies reads as follows: “Upon receipt of due proof that the death of the Insured resulted directly and independently of all other causes from bodily injury effected solely through external, violent and accidental cause, and that such death occurred within ninety days after sustaining such injury, subject to all the terms and conditions contained in See-, tion 2 hereof.”

The sole question to be considered here is whether the death of insured resulted directly and independently of all other causes from bodily injury effected through an accidental cause. There have been a number of decisions, on this question by the various courts, both state and federal. A study of these decisions leads us to the conclusion that the rule governing this class of eases is correctly stated to be that the cause is not accidental, if the insured, in doing what he did, should have foreseen the danger of being injured. That which cannot-reasonably be expected to follow as the result of an act is accidental. In other words, an insured may not voluntarily assume the risk of that which it is apparent or should be apparent to him, acting as a reasonable man, would result in injury or death. Unless a reasonable man could reach a different conclusion as to a probable result of his-conduct, there is no question for the jury. In a number of decisions this point has been thoroughly discussed : Mutual Life Insurance Company of New York v. Distretti, 159 Tenn. 138, 17 S. W.(2d) 11; Cory v. Woodmen Accident Company, 253 Ill. App. 20; Id., 333 Ill. 175, 164 N. E. 159; Travelers’ Ins. Co. v. Seaver, 19 Wall. 531, 22 L. Ed. 155; Carroll Case (C. C. A.) 143 F. 271, 5 L. R. A. (N. S.) 657, 6 Ann. Cas. 955; Casualty Co. v. Harroll, 98 Tenn. 591, 40 S. W. 1080, 60 Am. St. Rep. 873; Travelers’ Ins. Co. v. Randolph (C. C. A.) 78 P. 754; Lovelace v. Travelers’ Protective Ass’n of America, 126 Mo. 104, 28 S. W. 877, 30 L. R. A. 209, 47 Am. St. Rep. 638; U. S. Mutual Accident Ass’n v. Barry, 131 U. S. 100-121, 9 S. Ct. 755, 33 ’L. Ed. 60. See, also, 1 C. J. 510, § 339; 1 C. J. 446, § 115.

This court has had occasion to construe similar clauses in insurance policies. Continental Casualty Co. v. Willis, 28 F.(2d) 707, 61 A. L. R. 1069, and Mutual Life Ins. Co. of New York v. Dodge, 11 F.(2d) 486, 488, 59 A. L. R. 1290. In the Dodge Case Judge Parker of this court, in a well-reasoned opinion, has gone into fully the meaning of the word “accidental,” and says:

“ ‘Accidental’ is defined in Webster’s Dictionary as ‘happening by chance, or unexpectedly; taking place not according to the usual course of things; casual; fortuitous; as an accidental visit.’ And in defining the term ‘accidental means’ Corpus Juris says: ‘Where the effeet is not the natural and probable consequence of the means which produce it — an effeet which does not ordinarily follow and cannot be reasonably anticipated from the use of the means, or an effeet which, the actor did not intend to produce an! which he cannot be charged with a design of producing — it is produced by accidental means.’ 1 C. J. 427.
“Cooley’s Briefs on Insurance, at page 3156, gives practically the same definition. Judge Sanborn, speaking for the Circuit Court of Appeals of the Eighth Circuit, says: ‘An effect which is the natural and probable consequence of an act or course of action is not an accident, nor is it produced by accidental means. It is either the result of actual design, or it falls under the maxim that every man must be held to intend the natural and probable consequence of his deeds. On the other hand, an effect which is not the natural or probable. consequence of the means which produced it, an effect which does not ordinarily follow and cannot be reasonably anticipated from the use of those means, an effeet which the actor did not intend to produce and which he cannot be charged with the design of producing, * * * is produced by accidental means. It is produced by megns which were neither designed nor calculated to cause it. Such an effeet is not the result of design, cannot be reasonably anticipated, is unexpected, and is produced by an unusual combination of fortuitous circumstances; in other words, it is produced by accidental means.’ Western Com. Travelers’ Ass’n v. Smith, 29 C. C. A. 223, 85 F. 401, 40 L. R. A. 653, approved in Ætna Ins. Co. v. Brand (C. C. A. 2d) 265 F. 6 [13 A. L. R. 657].
“Mr. Justice Blatchford, speaking for the Supreme Court of the United States, says: ‘If a result is sueh as follows from ordinary means, voluntarily employed, in a not unusual or unexpected way, it cannot be called a result effected by accidental means; but if, 'in the aet which precedes the injury, something unforeseen, unexpected, unusual occurs, which produces the injury, then the injury has resulted through accidental means.’ Mutual Accident Ass’n v. Barry, 131 U. S. 100, 9 S. Ct. 755, 33 L. Ed. 60.”

Applying the rule, as above stated, and as laid down by Judge Parker, to the evidence in the instant case, and viewing the evidence in the light most favorable to the plaintiff, as must be done on motion to direct a verdict, we are forced to the conclusion that there was sufficient evidence to take the case to the jury. Certainly,, a reasonable man may not anticipate or foresee that his brother would shoot him, and such an aet on the part of one’s own brother is contrary to all preconceived ideas upon which reasonable men act. The case is entirely different from that where a man enters into an altercation with one whom he suspects of undue intimacy with his wife, or one who attacks an armed man in anger, or even one who pursues an armed criminal. Here the insured interfered in an altercation, evidently for the purpose of dissuading his brother from shooting another. He could not believe, nor would any reasonable man have believed, that his brother would shoot him. When his brother did shoot and kill him, it was within the meaning of the law an accidental cause. The judgment of the court below is reversed, with instructions to grant a new trial.

Reversed.