author: BRYAN, Circuit Judge.

text:
    GULF, M. & N. R. CO. et al. v. MERCHANTS’ SPECIALTY CO.

    No. 6100.
    Circuit Court of Appeals, Fifth Circuit.
    May 25, 1931.
    Albert S. Bozeman, of Meridian, Miss., and Harry McCall and R. E. Milling, Jr., both of New Orleans, La. (Yictor Leovy, of New Orleans, La., on the brief), for appellants.
    Gabe Jacobson, of Meridian, Miss. (Chas. B. Cameron and C. W. Hayward, both of Meridian, Miss., on the brief), for appellee.
    Before BRYAN, FOSTER, and HUTCH-ESON, Circuit Judges.

      Rehearing denied July 6, 1931.

   BRYAN, Circuit Judge.

This is an action on an order of the Interstate Commerce Commission awarding reparation on account of unreasonably high freight rates collected by a carrier for the transportation of salt from the mines in Louisiana to point of destination in Mississippi. It was brought by the consignee of the salt, who recovered judgment.

The carrier appeals and relies on two grounds for reversal. The first is that the order of reparation was not final. That order was issued by the commission March 11, 1929, and allowed appellant until April 26 following to make reparation. This action was brought in the district court in September 1929, appellant having failed up to that time to comply with the commission’s order by making reparation, or to apply for a rehearing. In March, 1930, appellant filed before the commission a petition for rehearing, which was granted in May of that year. The Interstate Commerce Act provides that the commission may establish general rules governing applications for rehearings, but that no such application shall excuse a carrier from obeying any order of the commission or operate to stay or postpone the enforcement thereof without special order; and that suit may be brought in the appropriate district court and be prosecuted in all respects like other civil suits for damages, if the carrier does not comply with an order of the commission for the payment of money within the time limit prescribed in such order. 49 USCA §§ 16a and 16(2). The order of reparation had become final under a rule of the commission before this suit was brought in so far as it affected appellee’s private rights concerning past transactions. The commission’s order granting the rehearing after suit was brought could not under the statute have the effect of depriving the District Court of the right to proceed to final judgment in the case before it. Baer Bros. v. Denver, etc., R. R. Co., 233 U. S. 479, 34 S. Ct. 641, 58 L. Ed. 1055. Nor does it appear, that the commission intended by granting a rehearing to do more than to consider rates for the future.

The second ground of this appeal is that the right of action, if any existed, accrued to the shipper rather than to the consignee. The shipper’s invoice named a unit price at destination, but there was deducted the amount of the freight charges which was stated to be for the consignee’s account. The consignee paid the freight and had no claim agáinst the shipper for reimbursement. It was therefore entitled to sue. Davis v. Mobile & Ohio R. R. Co. (C. C. A.) 194 F. 374.

The judgment is affirmed.


source: Caselaw Access Project

author: SAWTELLE, Circuit Judge.

license: Public Domain

text:
    UNITED STATES v. BAKER et al.
    No. 6250.
    Circuit Court of Appeals, Ninth Circuit.
    May 18, 1931.
    Geo. J. Hatfield, U. S. Atty., and I. M. Peckham and Francis J. Perry, Asst. U. S. Attys., all of San Francisco, Cal.
    Ramsey Probasco and Cyril W. McClean, both of Oakland, Cal., for appellees.
    Before RUDKIN, WILBUR, and SAW-TELLE, Circuit Judges.
   SAWTELLE, Circuit Judge.

This is an appeal by the United States of America from a judgment entered against them in favor of appellees in the sum of $3,874.98, with interest from date until paid, in an action brought by appellees to recover moneys they claimed to be due them from appellant for additional work, labor, and material rendered and furnished by appellees to appellant under or in connection with a written contract between them entered into on September 23, 1927, which provided, among other things, for the construction of approximately 17,867 linear feet of masonry guard rail, or guard rail wall, between stations 0-j-00 and 359-f-00 on route 1-A, Yosemite National Park, Cal., for which the contractors were to be paid on the basis of $12.75 per cubic yard. The amount of said judgment was made up of two items: First, in the sum of $1,128.32, represented extra cost of furnishing 1,640 linear feet of granite, but the government does not hear complam of the allowance of said sum as a part of the judgment; second, in the sum of $2,746.66, represented the amount of extra cost of a change which, as the complaint alleged and the court found, was made by the government in the plans for the construction of said guard rail as originally provided for in the written contraei Upon the allowance by the trial court of the amount represented by said second item, the main controversy on this appeal arises.

To the allegations of appellees’ complaint appellant interposed an answer consisting of a general denial of each and all of said allegations. On the trial, at the close of appel-lees’ evidence, counsel for appellant, stating that the defense did not care to offer any evidence, moved for judgment on all of the issues in favor of the government; the principal ground being that a prima facie ease had not been proved. The court denied said motion, and, upon motion of appellees’ counsel therefor, rendered its order for judgment for appellant on special findings. Touching the controverted second item, the trial court found as follows:

“IV. That plaintiffs were required to ■construct 3,829 linear feet of additional wall not contemplated in the written contract aforesaid.
“That it was contemplated hy the terms and provisions of the said written contract that said guard rail wall was to be carried, below the surface of the pavement, to an average depth of one foot for the entire length of the wall. That after the commencing of said work, a change in the depth of this wall was ordered by defendant’s authorized representative, making its average depth approximately six inches beneath the surface of the pavement for the entire length of the wall. That this change in the plans materially increased the costs per cubic yard of constructing said masonry guard rail, as masonry which was substituted in the upper part of the wall for masonry laid in the footings of the wall was more expensive to construct, a. * * ip^at plaintiffs are entitled to additional compensation therefor in the sum of $2,746.66.”

The principal errors assigned by appellant are that the trial court erred in making said finding No. IV and in not finding that the guard rail or wall, as built, was carried in every instance to the depth contemplated by the written agreement and that no change, by operation of law or otherwise, in plans or specifications thereof in reference to the required depth of said wall, was made by appellant or any of its agents, and that the trial court erred in making its conclusion of law that appellees are entitled to interest on the principal amount of the judgment.

From the record it appears that the written contract referred to was entered into upon the acceptance by the government of a bid theretofore submitted by appellees in compliance with the government’s invitation for bids. The terms of appellees’ bid proposed to furnish all labor and materials and perform all work required for constructing said masonry guard rail “in strict accordance with the specifications, schedules and drawings, for the consideration of the unit prices shown in the Bid Schedule.” Accompanying said bid was a “bid proposal” covering four items, one of which was as follows: “No. 69.” “Approximate Quantity, 3,400 Cu. Yds. Masonry Guard Rail at $12.75 per eu. yd., $43,500.” Said contract provided, among other things, in article 1, that the contractor should furnish all labor and materials and perform all work required for the construction of said masonry guard rail, between the stations previously specified herein, “in strict accordance with the specifications, schedules and di*awings, all of which are made a part hereof and designated as follows : Plans of the work consisting of * * * two sheets of typical section for masonry guard rail. * * * Specifications for Forest Road Construction, F. R. 50, Revised 1927. Special Provisions, Unit prices carried by the bid.”

In said “Special Provisions” it was among other things provided, in substancé, that said guard rail should be constructed, at places where directed by the engineer, who in the specifications for Forest Road construction was designated as the authorized representative of the contracting officer signing the contract on behalf of the government, “in conformity with the designs for type No. 1, See. A, as shown on the sheet of typical sections excepting at places where directed by the Engineer the alternate type composed of an upper section of approved stones laid in mortar and a foundation section of Class B concrete constructed in accordance with the alternate design for type No. 1, Sec. B, may be required. * * * The total length to be constructed is approximately 17,867 lin. ■J^. * • *»

One of the two sheets of typical sections above referred to, and which are attached to the contract, is designated “Type 1 — See. A. Typical Masonry Guard Rail,” and depicts the foot of said guard rail as extending below the contiguous ground surface “To Solid Footing.” The other sheet, designated “Type 1 — See. B. Typical Masonry Guard Rail (Alternate Design Using Concrete Base),” delineates the foot of such rail as extending below the contiguous ground surface to contact with a base, designated “Class ‘B’ Concrete,” resting upon a portion of the subsurface which is designated “To Solid Footing.” On neither of said typical section sheets is there shown the depth to which it was contemplated the guard rail was to extend below the surface. On the trial plaintiffs admitted that such depth is not shown and cannot be determined from the sheet entitled “Type 1 — Sec. A.” The guard rail was built and completed throughout in conformity with said “Type 1 — See. A,” and appellees do not claim that any change of plan occurred by reason of any direction or requirement of the engineer that any portion of the guard rail be constructed in accordance with the “alternate design Type 1 — See. B.” While the above-quoted portion of the special provisions specifies the approximate linear footage that was contemplated by the government at the time the contract was entered into, it is clear from provisions of the contract, hereinafter referred to, which reserved to the government the right to increase the quantities of the work to be performed, or to increase the length of the project, that the specification in the contract of the approximate linear footage was not final, but was subject to increase, at the option or election of the government. As regards any amount of cubic yardage that might be involved in the performance of the contract work, the contract did not specify the total amount of such yardage, approximate or otherwise, which it was contemplated the guard rail would contain. Obviously, in view of all the provisions of the contract, the amount of this cubic yardage could not be determined- or specified, even approximately, until the government engineer should, in the exercise of the right and option given him by the contract, determine and direct, as the work progressed and the subsurface conditions were disclosed, whether the work should be performed either entirely in accordance with the plan designated Type 1 — See. A, or partly in accordance with that plan and partly in accordance with the alternate design Type 1 — See. B, which alternate plan, if resorted to, might involve an increase in the quantity of subsurface work and greater cubie yardage than would be involved in construction in accordance with the plan Type 1 — See. A. In view, therefore, of the controlling provisions of the contract on this subject, the mere specification, in the itemized portion of ap-pellees’ bid, of an “approximate quantity” of “3,400 eu. yds. Masonry Guard Rail at $12.75 per cu. yd., $43,350.00” could not be taken as meaning that the 17,867 linear feet of guard rail to be constructed should contain, as is claimed by appellee, approximately 3,400 cubie yards of guard rail.

• The evidence further tended to show that, upon the signing of the contract, the contractors started the construction of the guard rail, and that it had been built for a length of some 13,000 or 14,000 feet, when, about the middle of January, 1928, the contractors were informed by the government engineer that they would be required to construct the guard rail beyond and in addition to the approximate 17,867 feet specified in the contract. In so informing the contractors, the engineer was acting pursuant to provisions previously herein referred to, which were contained in the specifications and “Special. Provisions” forming parts of the contract. These provisions recited that “the amount of the funds programmed for the work on this project * * * is $63,500.00,” and provided that, “in case the contract awarded for this work shall leave available any portion of the funds so programmed, the right is preserved to extend this contract to such extent as will absorb the funds so remaining available, either by increasing quantities of work to be performed or by increasing the length of the project beyond the termini as shown on the plans; provided that no such extension shall be made which will exceed in amount 25 per cent of the original amount of the contract.”

The work was completed by the contractors as directed by the engineer, but not without a protest by the former.

The first formal written statement of the grounds upon which the contractors based their protest and the claim for extra work which is alleged in paragraph Y of the complaint was in a letter which they wrote to Mr. Sweetser under date of March 22, 1928, several days after completion of the entirf contract work. In this letter, among other things, it was stated that “the wall as built, because of acceptable foundation condition, was not carried, except in special eases, to the depth contemplated or as shown on the original plans. An average saving of six inches in depth was made, covering a distance of 17,869 lineal feet. This amounted to some 650 cubic yards of masonry. This yardage, we were informed, was to be used in more wall and we were to be paid on the same basis of our bid price, namely, $12.79 per cubic yard. The change in plans added materially to the cost of this wall to us. Masonry laid in the upper part of the wall and which is more expensive to lay was substituted for wall laid in the bottom of a ditch. * * * Under Article 4 of Sheet 2, Construction Contract, we claim that latent conditions have been materially changed over the original plans and that therefore we should be reimbursed for this extra expenditure.”

Article 4 of the contract provides: “Article 4: Changed Conditions — Should the contractor encounter, or the Government discover, during the progress of the work subsurface and (or) latent conditions at the site materially differing from those shown on the drawings or indicated in the specifications, the attention of the' contracting officer shall be called immediately to such conditions before they are disturbed. The contracting officer shall thereupon promptly investigate the conditions, and if he finds that they materially differ from those shown on the drawings or indicated in the specifications, he shall at once, with the written approval of the head of the department or his representative, make such changes in the drawings and (or) specifications as he may find necessary, and any increase or decrease of cost and (or) difference in time resulting from such changes shall be adjusted as provided in Article 3 of this contract.”

Said Article 3 provides: “The contracting officer may at any time, by a written order, and without notice to the sureties, make changes in the drawings and (or) specifications of this contract and within the general scope thereof. If such changes cause an increase or decrease in the amount due under this contract ’* * * an equitable adjustment shall be made and the contract shall be modified in writing accordingly. No change involving an estimated increase or decrease of more than $500 shall be ordered unless approved in writing by the head of the department or his duly authorized representative. * * * But nothing provided in this article shall excuse the contractor from proceeding with the prosecution of the work so changed.”

In this connection it is pertinent to refer to another provision of the contract, embodied in a paragraph of the “Special Provisions,” which is entitled “Method of Measurement and Basis of Payment,” and which provides: “This work shall be measured in accordance with the dimensions shown on the plans, except where changes are ordered by the Engineer, and will be paid for at the unit prices bid per cubic yard for masonry guard rail complete in place. These prices shall be full compensation for all necessary excava^tion, backfilling, asphalt joint filler, supplying, hauling and placing all material and for labor, equipment, tools, and incidentals necessary to complete the work.”

On the trial it was stipulated by counsel for the respective parties that the contractors built 21,698 feet of guard rail, for which they were paid on the basis of $12.75 per cubic yard. The total number of cubic yards in said 21,698 linear feet of guard rail was 3,523.53, being 123.53 yards in excess of the “approximate quantity” of 3,400 cubic yards itemized by the contractors in their bid. Mr. Baker testified that all of the extra wall was built within the terminal points designated in the contract; that is, between station 0 — [—00 and station 350 — (—00. He further testified : “What I say in reference to the additional wall, with respect to the depth we had to go, also applies to the wall that we had already built, but we had no claim against that because we had overlooked the fact that this condition had come up; it was only when he asked us to build more wall that we objected. The old wall actually cost us 15 per cent more than we had anticipated, as well as the new wall. * * * After we had built 13,000 or 14,000 feet, we realized that we were losing a good deal of money because of this changed condition, but we had made no protest, we waive all claim on any extra work on that. • * * We really had as good a claim on that first 17,000 feet as we did on this latter part, but we had gone and completed the wall without any protest, and we allowed it to stand!’

It thus appears that not until plaintiffs were told they would be called on, under the • terms of the contract, to .build additional wall at the contract price, did they put forward their claim that the building of the wall at the lessened depth was a breach of their contract.

The foregoing review of the evidence, oral and documentary, has been made somewhat, full because we are of the opinion that it clearly refutes the contentions of appellees to the effect that a material change, or any change, was made in the written contract that was entered into between the parties, and shows that all the steps that were taken by the government engineer in directing the character and extent of the guard rail construction were in strict accordance with the provisions of the contract, which plainly anticipated and provided for all of the steps so taken, with the result that no change or modification was made in the terms of the contract or in the work that was to be performed thereunder. Equally inapplicable, in view of this evidence, are the authorities cited by appellees, which are eases upholding claims for extra work or alterations not provided for in the contract, and performed, with the knowledge and assent of the party entitled to performance, without compliance with contract provisions that no such work or alterations should be performed without a written order by the owner or some authorized person acting in his behalf, or cases involving misrepresentation as to the conditions of the work to be performed. In the ease at bar the evidence shows that no such conditions existed or arose under or in connection with the performance of the contract work. Here the contract provided, in substance, that the contractor should furnish all labor and materials and perform all work required for the construction of the masonry guard rail between specified stations, “in strict accordance with the specifications, schedules and drawings, all of which are made a part hereof and designated as follows : Plans of the work consisting of * * * two sheets of typical section for masonry guard rail. * * * Specifications for Forest Road Construction. * * * Revised 1927. Special Provisions. Unit prices carried by the bid.” In said “Special Provisions” it was, in substance, provided that said guard rail should be constructed at places where directed by the government engineer, and “in conformity with the designs for type No. 1 — -Sec. A as shown on the sheet of typical sections,” excepting at places where the government engineer might require the type shown on the sheet of typical sections designated “Type 1 — See. B * * * (alternate design using concrete base),” a design which did not specify any depth of guard rail footing, and which was not at any time directed or required by the engineer in the performance of the contract work, which was directed, conducted, and performed throughout in • accordance with said typical section “Type No. 1 — See. A,” a plan which, as plaintiffs admitted on the trial, did not show how deep they would have to go to reach the “Solid Footing” delineated thereon. Manifestly, in the circumstances here shown, the fact that, in bidding on masonry guard rail to be constructed in accordance with a plan or plans indicating no depth of footing, the bidders specified 3,400 cubic yards as the “approximate quantity” of cubic yardage covered by the bid could hot be construed as implying a representation by the government that the 17,867 linear feet which was contemplated as the length to which the guard rail should be originally constructed should contain 3,400 cubic yards, requiring, relative to. the length named, as the contractors claimed, an average footing of about one foot. Such an implication would not only be inherently unreasonable, but would go flatly counter to the above-mentioned provision to the effect that the guard rail should be constructed at places where directed by the government engineer and “in conformity with the designs for Type 1 — See. A,” which design, admittedly specifying no depth of footing, clearly left it within the power and discretion of the government engineer to direct at all places the depth of the guard rail footing, as required by the character of the surface and subsurface conditions disclosed as the work progressed, and unlimited by any arbitrary restriction which would require that such depth should average approximately a foot, regardless of what conditions the prosecution of the work might reveal. Clearly the specification in the bid of “approximate quantity” of cubic yardage, together with the price unit or price per cubic yard, was required primarily for the purpose of fixing a limitation upon the total or maximum amount of the work proposed to be performed under the bid if accepted, and keeping the cost of such work within the limits of the governmental program, and for kindred purposes. To hold that the specification of “approximate quantity” of cubic yardage in the bid submitted by the contractors and accepted by the government constituted a representation or warranty on its part that the footing of the guard rail should throughout be of such average depth that the approximate 17,-867 linear feet of constructed guard rail originally contemplated in the contract should contain an approximate total of 3,-400 cubic yards, and that any additional linear footage of guard rail that should be constructed pursuant to the contract should be of the same average depth, regardless of physical conditions disclosed as the work progressed, would be to disregard the clear provisions and purposes of the government, as expressed or clearly implied in the contract, and to make them subordinate to the interest and profit of the contractor.

Appellees cite and quote from the ease of Sartoris v. Utah Construction Co. et al., 21 F.(2d) 1, 2, decided by this court in 1927, certiorari denied by the Supreme Court 278 U. S. 651, 49 S. Ct. 176, 73 L. Ed. 562, as supporting the judgment rendered by the trial court herein. Two salient features of the Sartoris Case sharply distinguish it from the case at bar and render it inapplicable here. That case involved a claim for extra work done pursuant to a contract for the excavation of a tunnel for a railroad company, plaintiff, a subcontractor, claiming that said extra work was not within the specifications under which his contract was entered into. There the tunnel specifications originally furnished by the railroad company stated that “part of the tunnel excavation at each end is expected to be in earth formation, and the remainder in solid rock, with possibly a short distance in loose rock, or a combination of all three.” In the early progress of the Work, however, plaintiff encountered a formation of unusually fine loose sand which turned out to be continuous along the line of the tunnel for most of the way. Following a conference on the ground between the chief engineer and two other engineers for the railroad company and plaintiff, new specifications were prepared by the railroad company and given to plaintiff, pursuant to which he prosecuted the work to completion. Under these specifications the concrete lining was made thicker, the tunnel bore was correspondingly enlarged, and very much more extensive tim-bering was required, most of which was left in the structure. Plaintiff was paid extra for the additional concrete only, and by his action sought to recover the reasonable cost of the extra tunnel excavation and timbering required by the new specifications. This court held, in substance, that the language above quoted from the specifications was to be taken as a representation or assurance on the part of the railroad company, upon which plaintiff had the right to rely; that the only conceivable purpose of inserting the statement must have been to influence bidders and affect bids, and that it was equivalent to* saying to prospective bidders or contractors that in submitting bids and in contracting they might assume that part of the tunnel excavation would be in earth formation, and the remainder would be in solid rock, with possibly a short distance in loose rock, or a combination of all three, and that, by referring to the accompanying drawings, they would see that the design is suited to such, and only such, formation; that, so read, the language constituted a waranty; that the plans having been changed by the railroad company, and work thereunder having been done by the subcontractor under the direction and approval of the railroad company, and with knowledge for some time that the subcontractor was expecting pay thereunder, the subcontractor was entitled to recover therefor on the theory of implied contract; there being radical changes in construction the necessary additional cost of which would be very great, as all must have realized.

In the case at bar there was nothing in the bid or in the contract which could be taken as a representation or assurance on the part of the government as to the depth, or the average depth, to which the guard rail was to be constructed. That matter was left entirely open. No depth whatever was indicated in the contract, or in the typical section sheets or plans or the specifications of the “Special Provisions” forming a part of the contract. From that portion of the “Special Provisions” which provided that the “guard rail shall be constructed at places where directed by the engineer,” and from the large measure of direction, control, and discretion which other contract provisions conferred upon the engineer, bidders and contractors must be taken to have been clearly apprized that the depth of guard rail footings would be an uncertain and possibly a variable element, as it would of course be dependent upon the character of surface and subsurface conditions at the places which the government engineer had the right and diseretio» to select and designate as the places where the guard rail was to be constructed. Intending bidders, of course, had the opportunity, and in this case it was availed of by appellees, to visit the designated location of the proposed work, and, from an inspection of the ground, obtain a knowledge of its general nature and of the probable character of the subsurface within the designated limits of the work; and in making their bid and entering into the contract it was of course incumbent upon them to take into account whatever uncertainty existed as to the varying conditions of surface and subsurface that might he encountered in constructing the guard rail at the places 'designated by the engineer. In addition to the absence of any representation in this case as to what the subsurface conditions were, another distinguishing feature of this case is that here no new plans or specifications were prepared; the guard rail being constructed throughout “in conformity with the designs for Type No. 1 — Sec. A,” no complaint whatever being made that the government engineer did not exercise the right or option given him to require that any portions of the guard rail should be constructed “in accordance with the alternate design for Type No. 1 — See. B,” which would apparently have called for a greater quantity of the undersurface work which, the contractors testified, would have been more profitable than was the proportion of the work that was done above ground. As construction work progressed to completion, it was found that all of it could be performed in conformity with said design for “Type No. 1 — See. A,” with an average footing depth of about six inches. In the circumstances here shown, to hold that, because the contractors were disappointed in their estimate or conjecture that the average footing depth would be about one foot, they are entitled to be compensated for the loss arising from their failure to forecast clearly indicated probabilities involved in the doing of the work would be to disregard the plain provisions of the contract.

The foregoing discussion of the salient features of the present case renders unnecessary a discussion of the cases cited by appel-lees, which involve features of departure from original contract provisions which are wholly absent from this-case.

There remains for consideration the contention of appellant that the trial court erred in making its conclusions of law that plaintiffs are entitled to interest on the principal amount of the judgment. The determination of this question affects that part of the amount of the judgment which covers the allowance of $1,128.32, representing extra cost of furnishing 1,640 feet of granite, being the first item of plaintiffs’ claims. Aside-from the general contention that appellees are entitled to an affirmance of the judgment appealed from in the sum of $3,874.98, the full amount thereof, appellees make no answer to the contention of appellant that the allowance of interest on the amount of the judgment from its date was erroneous.

The decisions of the Supreme Court fully support this contention. In Seaboard Air Line Ry. Co. v. United States, 261 U. S. 299, at page 304, 43 S. Ct. 354, 355, 67 L. Ed. 664, the Supreme Court said: “The rule is that, in the absence of a stipulation to pay interest or a statute allowing it, none can be recovered against the United States upon unpaid accounts or claims. United States v. Rogers, 255 U. S. 163, 169, 41 S. Ct. 281, 65 L. Ed. 566; United States v. North American Transportation & Trading Co., 253 U. S. 330, 40 S. Ct. 518, 64 L. Ed. 935; United States v. North Carolina, 136 U. S. 211, 216, 10 S. Ct. 920, 34 L. Ed. 336; Angarica v. Bayard, 127 U. S. 251, 260, 8 S. Ct. 1156, 32 L. Ed. 159; Harvey v. United States, 113, U. S. 243, 5 S. Ct. 465, 28 L. Ed. 987.”

Again, Boston Sand Co. v. United States, 278 U. S. 41, 47, 49 S. Ct. 52, 53, 73 L. Ed. 170, citing the ease from which the above quotation is taken, refers to “the rule that the United States is not liable to interest' except where.it assumes the liability by contract or by the express words of a statute, or must pay it as part of the just compensation required by the Constitution.”

In the instant ease there is no provision of statute or contract stipulation calling for the allowance of interest on the claim presented by appellees, and that part of the judgment which allows interest on the amount of the judgment from the date of the judgment until paid was erroneous and should have been omitted.

The judgment appealed from is reversed, except as to the portion thereof which represents the sum of $1,128.32, the amount of appellees’ claim upon item 1 concerning the allowance of which amount the government does not here complain; and the trial court is directed to vacate the judgment as entered and to enter judgment in favor of appellees for said sum of $1,128.32, without provision for the allowance of interest on said amount.

WILBUR, Circuit Judge, concurs.


author: WALKER, Circuit Judge.

text:
    BLASS et al. v. VIRGIN PINE LUMBER CO.
    No. 6006.
    Circuit Court of Appeals, Fifth Circuit.
    May 25, 1931.
    Sydney C. Mize, of Gulfport, Miss. (Mize & Mize & Thompson, of Gulfport, Miss., and N. T. Currie, of Hattiesburg, Miss., on the brief), for appellants.
    R. W. Heidelberg, of Hattiesburg, Miss., Luther L. Tyler, of Picayune, Miss., and J. W. Backstrom, of Leakesville, Miss., for appellee.
    Before BRYAN, POSTER, £nd WALKER, Circuit Judges.
   WALKER, Circuit Judge.

Venable Blass, a boy about fourteen years of age, was killed by lightning while alone in the bathroom of a residence in the town or village of Piave, Miss., in which he lived with his parents. To recover damages for his death this action was brought against the ap-pellee, which operated a plant which provided electric light for residences and places of business in that town or village. Allegations of the declaration attributed the death of the deceased to negligence of the appellee in the wiring of the residence, in that there was no ground wire attached to the wire leading into the residence either on the inside or outside thereof, and in that there were no ground transformers or lightning arresters attached to appellee’s wires leading from its plant to the place where a wire led from ap-pellee’s wire conveying electric current into said residence. Those allegations were put in issue. Upon the conclusion of the evidence the court directed a verdict in favor of the defendant, the appellee.

As to whether appellee’s line between its plant and the point from which a wire went into the residence was or was not equipped with sufficient ground transformers or lightning arresters the evidence was in conflict. Uneontroverted evidence showed as follows: The residence mentioned was públie school property. It was built by or at the instance of the school board; it was furnished to the deceased’s father, a public school teacher, for his use, and appellee did not do, and in no way was responsible for, the wiring of that building or for the maintenance of that wiring, which was installed by or for the contractor who erected the building under a contract with the school board. There were two ways by which electric current might have been conducted into the bathroom or to objects therein, namely, by the wire leading from appellee’s line to said residence, or by a cast iron vent pipe, located on the outside of the residence, which went from the west side of the house beneath it and above ground, and extended to the other side of the house, where it entered a cesspool, the bathroom fixtures being connected with that vent pipe before it entered the ground, but having no connection with the light wire. In the wiring of a residence a lightning arrester or ground wire is a needed part of the wiring to carry into the ground lightning that may come over the wire leading to the house. No lightning arrester or ground wire was a part of the wiring of the residence. Immediately after the death of the deceased it was found that the light bulb at the end of the drop cord attached to the wire leading into the residence about the center of the ceiling of the bathroom was bursted. The drop cord itself was not injured, and the use of it was continued after the casualty. The facing of the door leading into the bathroom was loosened, nails being pulled, some enamel was knocked off the wash basin, the base board was bursted, and some of the molding was torn loose. An electrician who was a witness for appellants testified that if lightning had struck wires of appellee and gone into the residence with sufficient force to do the damage whieh testimony showed had been done, it would have burned up the drop cord, and no sign of the cord would have been left, and that if a stroke of lightning sufficient to tear base boards loose and kill a person were to strike the vent pipe, it probably would spread to other'metals nearby even if the vent pipe went into the ground. Another witness for appellants testified that at the time of the thunderstorm, while he was standing in a store located east of said residence, the ap-pellee’s plant being north of that residence, he saw a flash of lightning and heard a clap of thunder just before he saw a crowd going in the direction of that residence, and that that flash of lightning was in the direction of that residence, and it looked like it came from, a northwesterly direction. A short time after the casualty the fuses in the residence were replaced and the lights therein burned. An electrical engineer, who was the only witness examined for the appellee, testified that if a stroke of lightning of sufficient power to do the damage deposed to had entered over the light wire, then, in- his opinion,'the drop cord in the bathroom would have been destroyed; and that if lightning had struck appellee’s wires between its plant and the point from which a wire led into the residence, it would have burnt np the transformers located near that residence, with a result of cutting off electricity from that house and keeping electric lights therein from burning. His testimony to that effect was not contradicted. The deceased’s father, a witness for appellants, testified that he was at appellee’s electric plant, about half a mile from his residence, during the storm in which his son was killed, and that there was no excitement around the power plant, and he noticed nothing unusual there.

There was no evidence supporting the charge that the appellee was negligent in the wiring of the residence in that it supplied no ground wire, and that the death of the deceased was due to that negligence. The evidence without conflict showed that the appellee did not install or maintain the wiring, and that it was not responsible for the failure to supply a ground wire at or near the residence on the premises of its owner. Under the evidence adduced there were two theories as to how the electric current entered the bathroom, one that it was conducted through the vent pipe, and the other that it was conducted through the light wire with whieh the drop cord in the bathroom was connected. If the vent pipe was the means of entry, the appellee was not liable, as it had nothing to do with the installation of the vent pipe, and was not responsible for any defect in the manner of constructing or installing it. The death of the deceased could not properly be attributed to a failure of the appellee to provide lightning arresters at points along its line if the lightning struck the Wire leading into the residence at a point between the property line and the residence, where nothing could prevent the current entering the residence except a proper lightning arrester as a part of the wiring of the residence. It was not permissible for the jury to adopt the theory that the entry of the electric current into the bathroom was due to appellee’s failure to provide lightning arresters at points along its line unless there was tangible evidence to support the conclusion that such entry was due to that failure chargeable against appellee, rather than that the current got into the bathroom by means of the metal vent pipe or that it first struck the wire inside the line of the lot on which the residence was located and went into the bathroom because of the absence of a ground wire as a part of the wiring equipment of the residence.

Where an injury or death might have been due to say one of several causes for only one of whieh the defendant was responsible, the jury cannot properly guess between those causes and find that the negligence or fault of the defendant was the real cause where there is no satisfactory foundation in the evidence for that conclusion. Patton v. Texas & Pacific Ry. Co., 179 U. S. 658, 21 S. Ct. 275, 45 L. Ed. 361; Illinois Power & Light Corp. v. Hurley (C. C. A.) 30 F.(2d) 905. Instead of the evidence furnishing any substantial support for the conclusion that the entry of the electric current into the bathroom was due to the failure of the appellee to' have any or sufficient ground transformers or lightning-arresters on its line, rather than to a cause for whieh the appellee was not responsible, facts or attending circumstances •shown by uncontroverted evidence were inconsistent with that conclusion, and were consistent with the theories that the electric current entered the bathroom by means of the vent pipe, and that the stroke of lightning whieh caused the death came from the sky near the residence or between it and the property line of the lot upon which it is located. The evidence was such that the court would have been justified in setting aside a verdict which involved a finding that the .death was due to a cause for which the appellee was responsible. This being so, the above-mentioned ruling was not erroneous. Barrett v. Virginian Railway Co., 250 U. S. 473, 39 S. Ct. 540, 63 L. Ed. 1092.

Counsel for the appellants invoked the provision of a Mississippi statute that “All questions of negligence and contributory-negligence shall be for the jury to determine.” Hemingway’s Code Miss. 1917, § 503. Such a provision of a state statute does not have the effect in a federal court of making it erroneous for the court to direct a verdict, when the evidence is sueh that a verdict the other way would be set aside. Herron v. Southern Pacific Company, 51 S. Ct. 383, 75 L. Ed.-, April 13, 1931.

As to other rulings assigned as errors it is enough to say that none of those rulings involved reversible error.

The judgment is affirmed.


author: HUTCHESON, Circuit Judge.

text:
    INDEPENDENT ICE & COLD STORAGE CO. v. COMMISSIONER OF INTERNAL REVENUE.
    No. 5642.
    Circuit Court of Appeals, Fifth Circuit
    May 27, 1931.
    S. L. Herold, of Shreveport, La., for petitioner.
    G. A. Youngquist, Asst. Atty. Gen., Sewall Key, Sp. Asst. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., and John Mac C. Hudson and S. Dee Hanson, Sp. Assts. to Atty. Gen., for respondent.
    Before BRYAN, SIBLEY, and HUTCH-ESON, Circuit Judges.
   HUTCHESON, Circuit Judge.

From the determination of the Commis sioner that there was a deficiency in the sum of $7,067.52 in respect of petitioner’s tax for the year 1921, petitioner took its appeal to the Board of Tax Appeals, contending (1) that the assessment and collection of the tax for the year in question was barred by the statute of limitation, because, though a purported waiver of the statute had been signed by its secretary and treasurer for the corporation, it was unauthorized by and not binding upon it; and (2) that the respondent had erred in disallowing as excessive salaries paid to the corporate executives for that, as petitioner contends, they were reasonable salaries, and paid for services actually rendered.

The Board- considered and directly overruled the first contention, finding that Farley, the secretary-treasurer, was one of the two active executive officers of the corporation from 1912 to 1925, inclusive, and was in charge of the office during the times when the president, who was interested in many other businesses, and did not devote his entire time to petitioner, was absent; that the waiver which operated to extend the time was signed as the aet and deed of the corporation, bore its corporate seal, and was duly accepted by the commissioner; that it was effective to extend the time for making the assessment and to prevent the statute of limitation from running.

Upon the second point, the Board did not find affirmatively that the salaries were reasonable or unreasonable, and made -no find-inga of faet as to the character of the personal services actually rendered for which the salaries were paid. In its opinion it said: “The president of the corporation unquali-fiedly stated that these amounts were designed to compensate the officers for services performed prior to the taxable year. The petitioner’s books were kept and its income tax return was made on the basis of accruals, and under the scheme of the taxing statute each taxable year stands by itself. A corporation may not deduct from its profits'of one year the expenses that logically belong to a prior year.” Upon this view alone the disal-lowance as deductions of salaries paid in 1.921 for prior years services was sustained.

Petitioner seeks a review here of the finding and order of the Board, assigning, under four assignments, two errors. Assignments 1, 2, and 3 challenge the action of the Board in holding the waiver valid. Assignment No. 4 is: “The Board erred in deciding that petitioner was not entitled to take a deduction of $13,600.00 for 1921 representing additional compensation authorized and paid by the petitioner to its president and directors in 1921 for services rendered prior to 1921.”

The original record was filed in this court on July 15, 1929'; on November 19th of the same year, upon joint motion of counsel reciting : “In support of said motion the petitioner and respondent respectfully represent to this Honorable Court that the issue raised in the instant case in assignment of error No. 4 is identical with the issues involved in said 'cause of Lucas v. Ox Fibre Brush Company in which ease the Supreme Court of the United States granted a writ of certiorari on October 1,' 1929 and which case is now pending before said Court,” this court entered its order continuing the hearing in the cause. The Supreme Court, in the Ox Fibre Brush Co. Case, 281 U. S. 115, 50 S. Ct. 273, 74 L. Ed. 733, having decided, contrary to the position taken here by the Board, that “salaries paid in one year to compensate for services rendered in prior years constitute an allowable deduction in the year in which their payment became a binding obligation or were paid,” petitioner now insists that it should have judgment, here in its favor. Respondent, conceding that it cannot stand upon the Board’s opinion, insists that it can stand upon the finding of the Commissioner, not reversed by the Board,' that the salaries are excessive and unreasonable. Citing Wickwire v. Reinecke, 275 U. S. 101, 48 S. Ct. 43, 72 L. Ed. 184; Reinecke v. Spalding, 280 U. S. 233, 50 S. Ct. 96, 74 L. Ed. 385; Am-Plus Storage v. Commissioner (C. C. A.) 35 F. (2) 167; General Water Heater Corp. v. Com’r (C. C. A.) 42 F.(2d) 419; Austin Co. v. Commissioner (C. C. A.) 35 F.(2d) 910, to the point that the determination of the Commissioner that the salaries were in faet unreasonable was prima fade correct and the burden of proving it erroneous before the Board rested upon petitioner, respondent insists that that determination, not having been by the Board affirmatively disapproved, stands approved, and that the decision denying petitioner relief must be affirmed upon the principle that, if the Board reached the correct conclusion, it is wholly immaterial that it based its decision upon an untenable ground. Hurwitz v. Commissioner (C. C. A.) 45 F.(2d) 780.

Petitioner, replying, contends, first, that the effect of the Board’s finding is not to approve, but to disapprove, the finding of the ■ Commissioner that the salaries were unreasonable. It says that this is not at all a case where, the Board having reached a right result, its decision must be affirmed, even though the ground upon which it was put is erroneous. It argues that the cases cited by respondent sustaining the ultimate finding of the Board, despite the statement of an erroneous ground for its ruling, requires the reversal, not the affirmance, of its ruling here; that it in effect has a finding of the Board in its favor that the sums in dispute were paid as compensation for services rendered ; that they were reasonable, and as such were deductible but for the faet of their payment in one year to compensate for services in the prior years. It says: That resort to the Board presents the whole matter as an original proceeding that the Board “may investigate anew the issues between the government and the taxpayer, and upon the determination of the appeal it may affirm, set aside, or modify the finding and decision of the Commissioner.” Blair v. Oesterlein Co., 275 U. S. 220, 48 S. Ct. 87, 89, 72 L. Ed. 249. That “when a taxpayer brings his ease before the Board he proceeds by trial de novo. The record of the case made in the Internal Revenue Bureau is not before the Board except in so far as it may be properly placed in evidence by the taxpayer or by the Commissioner. The Board must decide eaoh case upon the record made at the hearing before it, and, in order that it may properly do so, the taxpayer must be permitted to fully present any questions relating to his tax liability which may be necessary to a correct determination of the deficiency.” E. J. Barry, 1 B. T. A. 157. That the “Board was not created for the purpose of reviewing rulings made by the Commissioner but was created for the purpose of determining the correctness of deficiencies in tax found by the Commissioner,” Gutterman, Strauss Co., 1 B. T. A. 245.

Respondent claims that the Boar d has not so found, but in effect just the contrary, and that petitioner finds itself in the position of complaining before this court of a finding of the Board upon a record wholly bare; except for the allegations of, the petition, of fáets by which to test the finding, and that, since the burden is upon the taxpayer to establish the illegality of the tax assessed, the correctness of the deduction claimed (Reinecke v. Spalding, 280 U. S. 232, 50 S. Ct. 96, 74 L. Ed. 385), the decision of the Board must be affirmed.

Considering, first, the question of waiver, we are not at all impressed with petitioner’s contention that a waiver, executed by the secretary-treasurer, the manager in large part generally, and of the fiscal affairs of the corporation completely, received and acted upon by the government, was not valid and effective to toll the statute.

“Taxation, as it many times has been said, is eminently practical.” Tyler v. U. S., 281 U. S. 503, 50 S. Ct. 356, 359, 74 L. Ed. 991, 69 A. L. R. 758.

It has to do with matters the great majority of which ought to be, and usually are; disposed of informally, and, where rights are substantially preserved, defects in form may not defeat them. Florsheim Bros. Co. v. U. S., 280 U. S. 453, 50 S. Ct. 215, 74 L. Ed. 542; Stange v. United States, 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed. 335, and courts will not permit a “sticking in the bark” to defeat a waiver voluntarily executed within the scope of the implied powers of him who- executed it, and which was acted upon by the officer of the United States to whom it was addressed. Florsheim Bros. Co. v. U. S., 280 U. S. 453, 50 S. Ct. 215, 74 L. Ed. 542; Stange v. U. S., 282 U. S. 271, 51 S. Ct. 145, 75 L. Ed. 335; Lucas v. Hunt (C. C. A.) 45 F. (2d) 781, for a waiver is not a contract; it is just what its name implies, a waiver voluntarily and unilaterally of a defense by the taxpayer. Aiken v. Burnet, 282 U. S. 277, 51 S. Ct. 148, 75 L. Ed. 339; Brown v. Burnet, 282 U. S. 283, 51 S. Ct. 140, 75 L. Ed. 343; Burnet v. Railway Equipment Co., 282 U. S. 295, 51 S. Ct. 137, 75 L. Ed. 349. Here the holding out by tbe corporation of Farley as secretary-treasurer as having authority to execute the waiver is emphasized by the fact that the return, which was the basis of the deficiency assessment, was without specific authority,- made by him. It is certainly not reasonable nor consistent to on tbe one hand contend that Farley had authority to file the return sufficient to avoid the penalties for failure to file, and yet, nothing different ap^ pearing, that he did not have the power to sign a waiver of assessment with regard to that same return, which, as the act of the corporation, he had made and filed. Besides, we think the primary facts found by the Board support the ultimate finding that Farley was authorized to execute the waiver for the corporation, whether under the Louisiana statutes he be regarded as its manager, or whether, the statutes aside, it bo considered that under general principles a. person charged, as he was, with the management of the corporation’s fiscal affairs, particularly with reference to the making and filing of its income tax returns, had implied authority to execute other papers in connection with the collection and handling of such tax returns, including the statutory waivers usual in such eases. California Iron Yards v. Commissioner (C. C. A.) 47 F.(2d) 514; Hammond v. Carthage (D. C.) 34 F.(2d) 155; Liberty Baking Co. v. Heiner (D. C.) 34 F.(2d) 513; United States v. Kemp (C. C. A.) 12 F. (2d) 7.

There is much to be said upon the second point in favor of petitioner’s view that the ease should be here treated as though tbe Board did in effect find that the salary allowances were reasonable, and did find them deductible, except as the view which they took of the law. prevented, and that, the law having been otherwise declared, petitioner should now have judgment.

We are of the opinion, however, since the Board did not make any affirmative fact findings in the matter of the reasonableness of the salaries, either primarily or ultimately, that this court should follow neither the suggestion of petitioner nor of the respondent, should neither affirm nor reverse finally the Board’s decision, but should reverse and remand the cause to the Board for a rehearing and precise finding and determination of these matters which its findings do not definitely dispose of. Francisco Sugar Co. v. Commissioner (C. C. A.) 47 F.(2d) 555; Avery v. Commissioner (C. C. A.) 22 F.(2d) 7, 55 A. L. R. 1277; Blair v. Oesterlein, 275 U. S. 225, 48 S. Ct. 87, 72 L. Ed. 249.

Reversed and remanded for rehearing.


text:
    ATLANTA-SOUTHERN DENTAL COLLEGE v. COMMISSIONER OF INTERNAL REVENUE.
    No. 5904.
    Circuit Court of Appeals, Fifth Circuit.
    May 27, 1931.
    Thomas M. Stubbs, of Atlanta, Ga., for petitioner.
    G. A. Youngquist, Asst. Atty. Gen., Sewall Key and A. G. Divet, Sp. Assts. to Atty. Gen., C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and R. L. Williams, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., J. P. Jackson, Sp. Asst. to Atty. Gen., for respondent.
    Before BRYAN, SIBLEY, and HUTCH-ESON, Circuit Judges.
   HUTCHESON, Circuit Judge.

This ease is here upon a petition for review of the finding and order of the Board of Tax Appeals sustaining the action of the Commissioner of Internal Revenue in refusing petitioner classification as a personal service corporation. The primary facts are fully and, fairly stated in the finding and opinion of the Board of Tax Appeals, in 15 B. T. A. 1325; they will not be restated here.

Petitioner was engaged in teaching, and it is admitted that if its evidence has brought it within the statutory definition, it is entitled to the classification claimed.

The relevant provisions of the statute are Revenue Act of 1921, e. 136, 42 Stat. 227, 228, 245:

“See. 218. * * * Personal service corporations shall not be subject to taxation under this title, but the individual stockholders thereof shall be taxed in the same manner as the members of partnerships. All the provisions of this title relating to partnerships and the members thereof shall so far as practicable apply to personal service corporations and the stockholders thereof.”
“Sec. 200. That when used in this title * * * the term ‘Personal service corporation’ means a corporation whose income is to be ascribed primarily to the activities of the principal owners or stockholders who are themselves regularly engaged in the active conduct of the affairs of the corporation and in which capital (whether invested or borrowed) is not a material income-producing factor.”

Eor an understanding of the case it is sufficient to say that petitioner is a corporation operating a dental college in Atlanta, Ga., having a capital stock of $50,000, and assets consisting of an, interest in the building and equipment with which it conducts its school, of a value in excess of $100,000. It had a gross income of $101,000. Of this income $86,912.74 was derived from student fees; $12,558.88 from the operation of its dental’infirmary. This infirmary operated as an essential part of the teaching equipment for the purpose of giving the students clinical experience in the practice of dentistry, was so operated as that though it produced r.o net gain, hut a net loss of $191, its quite considerable earnings, nearly 15 per cent, of the entire gross, converted what would otherwise have been a heavy loss, from that department, into an almost negligible one.

The board found that the faculty was composed of sixteen stockholding and seventeen nonstoekholding professors paid, respectively, $21,476 and $19,006. In addition, $7,000 was paid to nurses and other non-stockholding employees, and there were some expenses for borrowed money, aggregating about $4,000. It also found that twenty-two stockholders held its 500 shares of stock; that sixteen of these, holding 66.8 per cent, of the stock, were regularly engaged in the active conduct of its affairs. That six, holding 33.2 per cent, of the stock, were not so* engaged.

Upon these findings the board rested its ultimate finding that petitioner was not “a corporation whose income was to be ascribed primarily to the activities of the principal owners or stockholders themselves regularly engaged in the active conduct of its affairs.” No comment was made by the board upon, and no significance apparently given to the fact of the large amount of capital invested in the business, or the large percentage which the gross earnings of the infirmary bore to its total gross.

Petitioner, fully recognizing that if there is evidence to sustain them the primary fact findings of the board are conclusive here, contends that while the board did not err in any of the primary findings set down by it in the record, it did err in making primary findings which, correct as far as they went, were but half findings, sufficient indeed to support the ultimate conclusion of the board, as the record made by the board runs, but erroneous in that they did not fully find the established faijts which, if found, would have forced an entirely different conclusion.

Upon the point that more than -80 per cent, of the stock (T.DR sec. 62, art. 1529) was held by those regularly engaged in the active conduct of its affairs, they say that the board erred in excluding from the total of the stockholders so engaged Dr. Barn-well, holding 75 shares, whose 15 per cent, of the stoek, added to the 66.8 per cent, conceded by the board, would make up the aggregate which the regulations require. They say: “It is true, as found by the Board, that during the period involved Dr. Barnwell was vice-president of the corporation, attended its business meetings, and was subject to call as a special lecturer. It is true, as found by the Board, that he was not actively engaged in teaching, and during the period involved was not called upon to lecture; but the evidence goes much further and establishes not merely that this stockholder attended the business meetings of the corporation, but that he attended all such ’ meetings, and what is of greater importance, that he took an active part in the formation of the policies of the corporation, and was always consulted about the business administration of petitioner, very much interested in it.”

Upon the point made by the board that the income could not be ascribed primarily to the activities of the principal owners or stockholders, because, as found by it, “the seventeen non-stockholding professors and instructors were skilled employees, and were responsible for the production of a large portion of the petitioner’s income, and their efforts at producing income may not be’ ascribed to the management,” petitioner declares that the record establishes that it was the reputation for eminence in the dental profession of the stockholding professors which attracted students to the college; that every major subject in the course of instruction was taught by stockholding professors with possibly one exception; that the seventeen nonstoekholding professors were really assistants and associate professors and worked under the direct supervision of the stock-holding members of the faculty. That the vice president and superintendent, president, registrar and treasurer, the secretary, and all of the professors exeept one were stockholders. That every activity of the institution was either personally carried on by stockholders, or under their immediate direction, all executive management being vested in them, all of the contacts with prospective students being maintained by them, and all major subjects being taught by them. It cites Bryant & Stratton Com. School, 1 B. T. A. 32; Metropolitan Business College v. Com’r (C. C. A.) 24 F.(2d) 176; New Orleans Shipwright Co. v. Com’r (C. C. A.) 27 F. (2d) 214; Atlantic Coast Distributors v. Com’r (C. C. A.) 33 F.(2d) 733; Kaufman, Ltd., v. Com’r (C. C. A.) 24 F.(2d) 44; Strayer’s Business College v. Com’r (C. C. A.) 35 F.(2d) 426; Fuller & Smith v. Routzahn (D. C.) 23 F.(2d) 959, to the proposi-fcion that the statute should be reasonably construed so as to give effect to the purpose and intent of the Congress to give to the stockholders of a corporation performing personal services the same tax position as would be accorded to them if they were doing the same kind of business under partnership forms.

Respondent, invoking the usual presumptions which are accorded to the decision of the commissioner and the findings of the board, Avery v. Com’r (C. C. A.) 22 F.(2d) 6, 55 A. L. R. 1277; Wickwire v. Reinecke, 275 U. S. 101, 48 S. Ct. 43, 72 L. Ed. 184; Green’s Advertising Agency v. Blair (C. C. A.) 31 F.(2d) 96, insisting upon petitioner’s burden to clearly prove its claim to exemption from taxation, Cornell v. Coyne, 192 U. S. 418, 24 S. Ct. 383, 48 L. Ed. 504; Green’s Advertising Agency v. Blair (C. C. A.) 31 F.(2d) 96, and opposing to petitioner’s citations Metropolitan Business College v. Blair (C. C. A.) 24 F.(2d) 176; Wm. A. Brady Theatre Co. v. Com’r (C. C. A.) 42 F.(2d) 181; Crider v. Com’r (C. C. A.) 45 F.(2d) 974; Hatch v. U. S. (C. C. A.) 34 F.(2d) 436; Denver Live Stock Com. Co. v. Com’r (C. C. A.) 29 F.(2d) 543, 545, claims that if the matter here be decided upon a showing of hands, and by sheer weight of numbers alone, the board was right.

It says further that wholly apart from the grounds on which the board pitched its decision, that less than 80 per cent, of petitioner’s stockholders were regularly employed in the business, and that because of the very important activities of the nonstock-holding professors it could not be said that its income was to be ascribed primarily to the activities of its principal owners, the faets here admit of no other conclusion than, that petitioner’s capital was a material income-producing factor, both in the way of furnishing the place and equipment without which the teaching could not have been done and the income from student fees realized, but also in the production of gross income from the operation of the infirmary to the extent of nearly 15 per cent, of its total.

It must be admitted that there are decisions of the Board of Tax Appeals and of the courts applying this statute to varying faets which either in expressions used, or results reached, give some color to petitioner’s claim to exemption, as it must also be admitted that the words used in the act to delimit corporations entitled to personal service classification are words not of art, but of general significance, in their nature equivocal, and in close cases having a capacity for narrower or wider meaning, according to the point of view from which the inquiry is approached. Further, it is eertainly true that in the construction and application of taxing statutes the judicial machinery should not be too tightly geared. The gearing should, indeed must, allow for a reasonable judicial back lash as the varying faets of particular cases are subjected to scrutiny. It is equally plain, however, that such judicial play as is allowed for must be within frictional limits, oscillatory rather than ambulatory, and that though when the matter for decision is merely quantitative, that is, as to the degree in which the statutory elements are present in a particular case, judicial mind? may well differ in their conclusions, when there is no question of degree, but merely the qualitative one of whether the statutory elements are present, there is no room for such play but only for ,tho exercise of strong common sense, under the influence of which the words of the statute, rather than its supposed spirit, must control.

In short, while it is no doubt an entirely proper construction in eases of corporations conducting a personal service business, such as teaching where the business is conducted through the personal activities of the incorporators though other persons are employed to make practically effective the enterprise and efforts of the incorporators, and though some capital though small is actually used, to view from a liberal standpoint the question of whether the activities of those employed by the incorporators are secondary or primary, and whether the capital is a material income producing factor [Shipley School v. McCaughn (C. C. A.) 34 F.(2d) 281], quite the other point of view should control where the facts present the case of a carefully organized and articulated corporation, thoroughly financed, doing a large and profitable business with the employment of a considerable amount of capital and the use of a large force of nonstockholding, skilled service of the same general grade and character as that rendered by the stockholders, and where in addition, as a part of the necessary business of teaching, an infirmary is conducted for the purpose of making the teaching effective, that infirmary producing nearly one sixth of the gross income of the corporation.

Whether then a close analysis of the faets of the eases cited by petitioner would show the decisions in them to be differentiable from those cited by respondent, and who would upon a showing of hands upon the apparent conflict have to take the count, it wouldj servo no useful purpose to here attempt fc> resolve, for we think that not only does the evidence fully sustain the finding of the board denying petitioner a personal service classification, but that there is no evidence upon which any other finding could have been legitimately rested, and this not only upon the grounds taken by the board, but upon the further ground that it admits of no contrary opinion that the capital employed by petitioner in the conduct of its business was a material income producing factor, both as to the monetary returns which came directly from the operation of the dental infirmary, and as to the tuition fees themselves. As to the tuition fees, it is perfectly plain that they were earned and produced by the use of a plant and equipment without which, no matter how eloquent the teaching of the stockholding professors might have been, no matter how magnetic the influence and drawing capacity of the stockholders, no single student could have been drawn to the school, or if drawn, kept, and instructed there.

Viewed in the large, this seems to be a case in which the presence of one of the elements of the classification, the personal service character of the work performed by the corporation, has been permitted to bulk so large as almost to close the eyes of the petitioner to the absence of all of the other elements, so that its real insistence in the end is to have construction supply the missing facts, or in the language of the street, to have the tail wag the dog.

The petition for review is denied, the judgment of the board is affirmed.