author: MILLER, District Judge. STONE, Circuit Judge

text:
    HODGSON v. FEDERAL OIL & DEVELOPMENT CO. et al.
    (Circuit Court of Appeals, Eighth Circuit.
    March 28, 1925.)
    No. 6409.
    I. Mines and minerals <§=>5 — Lack of knowledge on part of claimant under placet mining laws of provisions of Leasing Act held not to operate as equitable suspension of six months’ limitation contained therein.
    That owners of mining title under pre-exist-ing placer mining laws, entitled under Oil Leasing Act Feb. 25, 1920, § 18 (Comp. St. Ann. Supp. 1923, § 464014Í), to preferential right to oil lease on their relinquishment to the United States within six months of all rig'kt, title, and interest under pre-existing placer mining law, did not have actual knowledge of provisions of such section, or, limitation provided therein, held not to operate as an equitable suspension of such limitation, in view of section 32 (Comp. St. Ann. Supp. 1923, § 4640%pp), and Regulations of Secretary of Interior, § 24%, under date of March 11, 1920.
    2. Mines and minerals <§=»5 — Claimant under placer mining laws, whose right to preferential lease was barred by limitation, held not entitled to impose trust on leasehold acquired by another.
    Claimant under placer mining laws, whose preferential right to oil lease under Oil Leasing Act Feb. 25, 1920, § 18 (Comp. St. Ann. Supp. 1923, § 4640%i), had been barred by limitation, held not entitled to impose trust on leasehold estate acquired by another.
    Stone, Circuit Judge, dissenting.
    Appeal from the District Court of the United States for the District of Wyoming; T. Blake Kennedy, Judge.
    Suit by James M. Hodgson against the Federal Oil & Development Company and others. From a decree of dismissal (285 F. 546), plaintiff appeals.
    Affirmed.
    J. M. Hodgson, of Denver, Colo. (R. P. Stewart, of Washington, D. C., on the brief), for appellant.
    Harold D. Roberts and Paul P. Prosser, both of Denver, Colo. (Dines, Dines & Holme, of Denver, Colo., on the brief), for appellees.
    Before STONE, Circuit Judge, and HUNGER and MILLER, District Judges.
   MILLER, District Judge.

This ease is here on appeal from an order of the lower court dismissing appellant’s bill for want of equity. His bill, filed May 26, 1922, sought to have appellees declared trustees for appellant to the extent of an undivided one-eighth interest in an oil and gas lease granted by the United States to the Federal Oil & Development Company, covering the southeast quarter of section 13, township 40 north, range 79 west, Natrona county, Wyo., and for an accounting. The facts alleged, omitting jurisdictional allegations and some details, are substantially as follows:

On January 11, 1887, the above-described quarter section was vacant and unappropriated domain of the United States, open to location, exploration, and purchase under the placer mining laws then in force. On that day George McManus, H. T. Snively, G. B. Hall, M. Iba, Perry Doan, William F. Ford, Martin Ashcraft, and Sam Bed-saul, all qualified so to do, did associate themselves together for the purpose of locating, holding, and working the said quarter section as an oil placer mining claim, and did so locate said premises as an association oil placer mining claim, by complying with all the laws, rules, and regulations, both federal and state, required to lawfully make such location, and thereafter did make discovery of valuable deposits of minerals, to wit, petroleum and other mineral oils, in and upon said premisés. That said claim is situated within the limits of the area embraced within the executive order of withdrawal issued by the President of the- United States under date of September 27, 1909, which said order of withdrawal was never recalled or revoked prior to the 25th day of February, 1920. That at the date of the executive order of withdrawal the said claim was a valid and subsisting mining claim under the mining laws of the United States. That the interest and estate of George McManus, his heirs, and this appellant in said premises have never been forfeited or abandoned. That George McManus died intestate on or about September 16,1901, leaving as his sole heirs at law the widow, Anna McManus, a daughter, Octavia Green, formerly Octavia McManus, and a grandson, Charles F. Trusty. The widow and daughter have never been citizens or residents of Wyoming and have never been within that state. The grandson was never in the state until-years immediately preceding the commencement of this action. None of them ever had any actual knowledge of the existence of said placer mining claim, or of the interest or title of George McManus therein, and no actual knowledge or information of any kind leading to knowledge of their rights in the premises, until February 11, 1922, and shortly afterward. That none of said heirs of said George McManus, deceased, had or acquired until February 11, 1922, any actual knowledge of the right and privilege granted them by the Act of Congress approved February 25, 1920 (Comp. St. Ann. Supp. 1923, §§ 4640%-4640%ff, 4640%g-4640%ss), known as the Oil Leasing Bill, to make application within six months after the approval of said act for and to be granted an oil and gas lease on said premises or for an undivided one-eighth part thereof, and granting and confirming to them as owners of the mining title under pre-existing placer mining laws the preferential right to an oil lease theretofore located as oil placer mining claims under the laws of the United States, upon which there had been discovered oil in substantial quantities prior to said executive order of withdrawal. That on the said 11th day of February, 1922, the said heirs at law, for a valuable consideration paid to them by the appellant, by proper deeds of conveyance, duly sold and conveyed all their right, title, and estate in said premises to the appellant herein, who is now the owner and holder thereof.

During his lifetime McManus never -sold, conveyed, or incumbered his interest in said property, nor did any other person, lawfully authorized so to do, ever sell, assign, or convey the interest of said McManus in said premises, or any part thereof, to any person or corporation whatever. That on March 11, 1884, 'George McManus, Perry Doan, Sam Bedsaul, Scott Morford, James McFarland, William Hudson, and William Meyers gave to Shepard Fales and Cy Iba a power of attorney to jointly locate for said principals oil placer mining claims in Carbon county, then territory of Wyoming, now Na-trona county, Wyo., and delegated the' power to said Fales and Iba to jointly sell and convey as agents of said principals such placer mines as might be located by them as attorneys in fact for their said principals. This power of attorney was never executed by Fales and Iba, but Cy Iba did attempt to exercise it on February 18, 1890, by executing a deed as the pretended attorney in fact of McManus and his coloeators of the said claim, purporting to convey to one Victoria A. D. Johnson an undivided one-half interest in said-premises. Fales did not join in this deed.

In- March, 1900, Ashcraft and Bedsaul conveyed to Cy Iba their interest in said premises. On April 12, 1905, Cy Iba, by a quitclaim deed stating on its face that it conveyed an undivided one-half interest, conveyed his interest to Joseph H. Lobell. On February 16, 1907, Victoria A. D. Johnson, by quitelaim deed purporting on its face to convey an undivided one-half interest in the premises, conveyed to Frederick J. Lobell her interest in said premises. Two days later by similar quitclaim deed Frederick J. Lobell conveyed the same to Joseph H. Lo-bell, his brother. ' On August 16, 1915, Joseph H. Lobell conveyed all his interests thus received to the appellee, the Federal Oil & Development Company.

On May 15, 1918, the Federal Oil & Development Company applied for a mineral patent to the premises. This application was adversed by the United States and the application withdrawn on March 25, 1920, about one month after the passing of the Oil Leasing Act, approved February 25, 1920. In considering -that application for a mineral patent the General Land Office found as a matter of law that George McManus owned at that time an undivided one-sixteenth interest in the said placer mining claim, but afterwards, on the application of the appel-lee, the Federal Oil & Development Company, for the oil lease in question here, reversed that decision, and held that all of the title of McManus had passed to the Federal Oil & Development Company by purchase. That in so holding and granting the said lease to the Federal Oil & Development Company the Commissioner of the General Land Office and Secretary of the Interior mistook,misconstrued, and misapplied the law applicable to undisputed facts before them, and by reason of such mistake, misconstruction, and misapplication of the law applicable thereto, granted the said oil and gas lease to said appellee the Federal Oil & Development Company. That the appellees, and eaeh of them, had full knowledge and notice, actual and constructive, of the claim, right, title, interest, and, estate of the said George Mc-Manus, his heirs, and their successors in interest in and to an undivided one-eighth interest in said premises and -the oil contents thereof, and of their right under the law to an undivided one-eighth interest to any oil and gas lease of said premises that might be granted by the United States under the provisions of the Act of Congress approved February 25, 1920.

That appellant’s grantors at the date' of said lease were, and this appellant is now, a eotenant of the said appellees, and eaeh of them, in said leased premises and leasehold under said oil and gas lease granted to the said appellee the Federal Oil & Development Company, and is entitled to an undivided one-eighth interest' in and to the said oil and gas lease and the oil extracted therefrom, subject to the ’deduction and payment of the cost and expense of development, operation, production, and the payment of the royalty to the United States. That said appellees hold any and all oil that has heretofore been and may hereafter be produced and sold from said premises as trustees for this appellant. That the appellees are in actual possession of said premises under said lease and now engaged in extracting oil therefrom in large quantities, selling the same, and appropriating to their sole use the net proceeds of said oil and excluding the appellant from any interest or share therein and refusing to recognize the rights of the appellant therein. That appellant offers to do equity in the premises, and is willing to do and perform all acts and things that may be required of him by the court as a condition to granting the relief sought in this action, conformable to the rules and practice of equity.

On August 21, 1920, the Federal Oil & Development Company applied for an oil and gas lease to the premises under the provisions of section 18 of the Act of Congress of February 25, 1920 (Comp. St. Ann. Supp. 1923, § 4640141), and those proceedings culminated in the issuance of an oil and gas lease to the appellee, the Federal Oil & Development Company on March 25, 1921, which company on April 28, 1921, assigned a fraction thereof to the appellee the Mountain & Gulf Oil Company.

Appellant prays judgment that he be decreed to be the owner of an undivided one-eighth interest in and to said leased premises, and of an undivided one-eighth interest in all petroleum, oil, gas, and other mineral contents of said premises for and during the term of the lease, renewals, and extensions thereof, and of an undivided one-eighth interest in all oil extracted and produced therefrom by the appellees as trustees for the appellant. That appellees be ordered to execute and deliver to appellant a proper instrument of assignment conveying an undivided one-eighth interest in and to said oil and gas lease, and appellees be ordered to account to appellant for all oil produced from said leased premises or the proceeds thereof.

To this bill appellees filed identical motions to dismiss on the following grounds: (1) That the bill fails to state facts sufficient to constitute a cause of action; (2) that the appellant has been guilty of laches; (3) that the relief is barred by the limitations contained within the Act of Congress of February 25, 1920; (4) the statutes of limitations of the state of Wyoming; (5) a final determination and adjudication of all matters in controversy between the appellant and the appellees by the Secretary of the Interior of the United States against all rights claimed by appellant; and (6) that the United States is an indispensable party to the action.

On the 16th day of December, 1922, after argument, the court sustained said motions and entered its order dismissing the said bill, to which order the appellant duly excepted. Appellant alleges and specifies error on the part of the trial court in sustaining said motions on each and every ground thereof.

Appellant’s contention is that the Land Commissioner and Secretary of the Interior misapplied, mistook, and misconstrued the law applicable to the facts before them, in finding and concluding as a matter of law that the several conveyances set forth in appellant’s bill conveyed to and vested in the appellee the Federal Oil & Development Company the interest and estate of George McManus in the premises described about August 26, 1915, and that the mining title to said premises was not in issue, and further that the title held and possessed by the appellee the Federal Oil & Development , Company, at the date of its application for the lease in question, was sufficient in law to entitle it to the lease issued under the provisions of law applicable thereto, and that the quitclaim deed of the Federal Oil & Development Company to the United States conveyed and relinquished to the United States the interest and estate of George McManus, and that it was by reason of such misconstruction and misapplication of the law that the lease in question was granted to the said appellee; that as a matter of fact and as a matter of law it appears from the bill that prior to and on the date of appellee’s (the Federal Oil and Development .Company’s) application for and the date of the granting to said ap-pellee by the United States of the oil and gas lease in question, appellant’s grantors and appellee the Federal Oil & Development Company were eotenants of the premises described-in his bill, appellant’s grantors owning an undivided one-eighth interest therein that because of said cotenancy the rights, interests, and estate acquired by the appellee the Federal Oil & Development Company under said lease inured to the benefit of all eo-tenants, and, therefore appellant, as owner of the McManus undivided one-eighth interest in said premises, is entitled to have said lease impressed with a trust to that extent.

It is not pretended that the alleged mistakes of law set forth in the bill invalidate the lease or prevent the passing of the title to the lessee. The contention is that the facts alleged are sufficient in equity to justify a court of. equity to impress the lease with a trust in favor of appellant.

Section 18 of the Oil Leasing Act, approved February 25, 1920, provides the sole conditions upon which a lease under any circumstances could have been issued to appellant or his predecessors. The applicable portion of that section is as follows:

“That upon relinquishment to the United States, filed in the General Land Office within six months after the approval of this act, of all right, title, and interest claimed and possessed prior to July 3, 1910, and continuously since by the claimant or his predeeessor in interest under the pre-existing placer mining law to any oil or gas bearing land upon which there has been drilled one or more oil or gas wells to discovery embraced in the executive order of withdrawal issued September 27, 1909, * *' * and upon payment as royalty to the United States of an amount equal to the value at the time of production ofone-eighth of all the oil or gas already produced, * * * shall be entitled to a lease thereon from the United States for a period of twenty years. * * 31 All leases hereunder shall inure to the benefit of the claimant and all persons claiming through or under him by lease, contract, or otherwise, as théir interest may appear. * * * jy

Section 32:

“That the Secretary of the Interior is authorized to prescribe necessary and proper rules and regulations and to do any' and all things necessary to carry out and accomplish the purposes of this act.” Comp. St. Ann. Supp. 1923, § 4640%pp.

Section 24%, Regulations of the Secretary of the Interior, under date of March 11, 1920, provides:

“All proper parties to a claim for relief under sections 18,19, or 22 of the act, should join in the application, but, if for any sufficient reason that is impracticable, any person claiming a fractional or undivided interest in such claim may make application for a lease or permit, stating the nature and extent of his interest, and the reason for non-joinder of his co-owner or eo-owners. In eases where two or more applications are made for the same claim or part of a claim, leases or permits will be granted to one or more of the claimants, as the law and facts shall warrant and shall be deemed just.”

It therefore appears that before ap-' pellant or his predecessors in interest would be entitled to any lease from the government for any interest in said premises, he or they must, within six months after February 25, 1920, have relinquished to the United States all their right, title, and interest claimed or possessed prior to July 3,1920, and continuously since by such applicant or his predecessors in interest under the pre-existing mining law to any oil or gas bearing land embraced in the executive order of withdrawal of September ,27, 1909, and have paid to the United States as royalty an amount equal to the value at the time of production of one-eighth of all the oil or gas already produced. Neither compliance or attempted compliance with sudh conditions are alleged or pretended but the bill expressly negatives such facts. It is, however, alleged in the bill that appellant’s grantors were without actual knowledge of the provisions of section 18 of the Leasing Act until February 11,1922, and appellant argues that such lack of actual knowledge in some equitable manner operated to suspend the six months limitation provided for in said act. We think a sufficient answer thefeto is that the statute makes no such exception; but see Madden v. Lancaster County, 65 F. 188, 194-195, 12 C. C. A. 566; U. S. v. Missouri Pac. Ry. Co., 213 F. 169-173, 130 C. C. A. 5.

The question then under the third ground of the motions is narrowed to whether the appellant may impose a trust on a leasehold that neither he nor his grantors at any time were or now are entitled to receive, or any part thereof, from the lessor. We think the law on this question is well settled. The rule is aptly stated in Anicker v. Gunsburg and Others, 246 U. S. 110, 38 S. Ct. 228, 62 L. Ed. 603, where it is said:

“In order to maintain a suit of this sort the complainant must establish not only that the action of the Secretary was wrong in approving the other lease, but that the complainant was himself entitled to an approval of his lease, and that it was refused to him because of an erroneous ruling of law by the Secretary.”

See, also, Duluth & Iron Range Railroad Co. v. Roy, 173 U. S. 587, 19 S. Ct. 549, 43 L. Ed. 820; Bohall v. Dilla, 114 U. S. 47, 5 S. Ct. 782, 29 L. Ed. 61.

Because the bill fails to allege compliance or an attempt to comply with the requirements of section 18 of the Act of Congress approved February 25, 1920, it does not state a cause of action in equity, and therefore was properly dismissed for want of equity under the third ground of the motions to dismiss. That being true, other questions raised and argued do not require our consideration.

The order of the lower court is affirmed.

STONE, Circuit Judge

(dissenting). This is a bill by appellant, Hodgson, against the Federal Oil & Development Company and the Mountain & Gulf Oil Company to have them declared trustees for him of his one-eighth interest in the oil and gas lease covering certain public land in Wyoming, and which was made under the so-called “Oil Leasing Act” (Act Feb. 25, 1920, 41 Stat. 437). Appellees filed identical motions to dismiss which, as amended, were based upon the grounds of insufficiency of allegations of fact, laches, bar by the limitations of the “Oil Leasing Act” (section 18), bar by limitations under tbe statute of tbe state of Wyoming, res adjudicata by determination of the Secretary of the Interior, and lack of necessary party defendant (the United States). The trial court handed down a memorandum opinion wherein, without expressing any decision as to other points raised by the motions, it determined that the bill should be dismissed because barred 'by the statute of limitation of the state of Wyoming and because of laches. From a decree dismissing the bill, this appeal is brought.

The essential allegations of the bill, in so far as the motions to dismiss are concerned, are as follows:

On January 11, 1887, eight natural persons "located the O’Glase claim on the S. W. % of section 13, township 40, range 79, in what is now the county of Natrona, Wyo. The location was made under the placer mining laws. The requisite labor and development were performed upon the claim, up to and including the year 1920.

Among these eight locators was George McManus, who subsequently died in 1901, leaving, as his heirs at law, a widow, a daughter and a grandson, who were never residents of the state of Wyoming, with the exception of the grandson, who became such a short time before the commencement of this suit. These heirs did not know and had no information leading to knowledge of the right, title or interest of the said George McManus in the lands in controversy until about the date of the assignment hereinafter mentioned. In February, 1922, these heirs at law assigned all their rights in the property and premises to the plaintiff, who is a resident of Wyoming. The requisite discoveries, work and possession of this claim were made by and remained continuously in McManus and his eoloeators, and they became entitled to a patent therefor under the terms of section 2332 of the Revised Statutes (Comp. St. § 4631) and the Act approved February 11, 1897 (29 Stat. 526 [Comp. St. § 4635]). This claim was situated within the area embraced by the executive order of withdrawal, dated September 27, 1909, and that said order was not withdrawn or revoked until the Oil Leasing Act of February 25, 1920. At the date of said withdrawal order, this mining claim was a valid and subsisting placer claim under the statutes of the United States, and the property of George McMan-us and his eoloeators. The rights of Mc-Manus and his heirs therein have never been transferred, forfeited or abandoned" except as assigned to appellant.

On August 21, 1920, the defendant Federal Oil & Development Company (claiming as the successor in interest of the locators) filed an application for a lease of the above described lands under the Oil Leasing Act. On March 25, 1921, a lease to said defendant was recommended by the Commissioner of the General Land Office and, on April 1, was ratified and confirmed by the Secretary of the Interior and was issued to said defendant as of August 21, 1920.

Further, the bill alleges erroneous representations on the part of the applicant for the lease and sets out certain findings of the Commissioner and Secretary and particularly alleges errors of law committed by these officers in awarding the lease to the defendant company.

Among other things, it is alleged that the Department of the Interior found that five of the locators in 1886 gave to one Cy Iba a power of attorney to locate lode and placer mining claims in the Rattlesnake mining district in the county of Carbon, territory of Wyoming (the mining district in which the claim in controversy was then located), and that in 1884 a similar power of attorney was granted by some of the locators to said Iba and one Fales to do practically the same things. McManus was one of the locators executing the latter power of attorney. These powers of attorney, in addition to granting the right to the attorney to locate claims, gave the right to sell and convey said claims for their principals.

On February 18, 1890, Cy Iba executed and delivered a quitclaim deed of an undivided one-half interest in the O’Glase claim to Victoria A. D. Johnson, and on April 12, 1905, Iba conveyed an undivided one-half interest in the claim to Joseph H. Lobell. On February 16, 1907, Victoria A. D. Johnson conveyed her undivided one-half interest to Frederick J. Lobell, who two days later conveyed this interest to Joseph H. Lobell, and who in turn, on August 26, 1915, conveyed the entire claim to the defendant Federal Oil & Development Company.

The department then held that the so-called powers of attorney granted to Cy Iba were deeds of trust by which Iba was authorized to sell and convey claims of the character of the O’Glase after they had been located, and such deeds of trust were not revocable without the consent of Iba, which consent he did not give to any one, and that it followed that Iba had the authority to convey the legal title to the O’Glase claim, which he did in the manner before specified, all of which was shown by the abstract of title filed •with the application, and that the applicant thereby became the holder of the fee title and, having surrendered the same to the United States, was entitled to the lease which it subsequently received.

Plaintiff alleges that the Department of the Interior committed an error of law in that the only power of attorney executed by McManus was the one in 1884, which was a joint power to Iba and Pales, and that Pales not having joined in any transfer with Iba, the attempted transfers were ineffectual and void in law, which transfers were held valid by the department; and further, that the records did not show that the 0’Glasé claim was actually located by either the said Iba or Pales under the power of attorney, but alleges the fact to be that they were located by the locators themselves. It is alleged that in the letter and decision of the land commissioner it was found that the Pederal Company had, on May 15,1918, filed mineral application No. 016998, Douglas Series, for said land, and on December 8, 1919, adverse proceedings had been ordered therein, but that such application was withdrawn and the case closed, March 25, 1920. It alleges that Pales never joined with Iba nor was named as a grantor nor in any way joined in the above two deeds by Iba; that the deeds by Iba were executed by him in his sole behalf and not as attorney in fact for McMianus or any other of his colocators; and that this character of the Iba deeds and the lack of co-operation therein by Pales was clear upon the face of the deeds themselves and that no other conveyances even purporting or claiming to convey the interest of George McManus are in existence. It is claimed that these deeds by Iba, which constitute the sole basis of appellees’ claim, conveyed no part of McManus’ interest in the placer claim; that the adjudication to the contrary by the Secretary of the Interior was erroneous as matter of law on the facts and documents before him; that the sole right of the Pederal Company to the lease rested upon its allegation of ownership of the placer claim; that the procurement of the lease upon this basis would inure to all owners of the placer claim in proportion to their interest therein; that it would hold such lease as trustee for such owners; that one of such owners, being a cotenant in the placer claim, is appellant as the successor of the McManus interests, amounting to one-eighth of the whole.

The bill offers to do equity and asked a •declaration of this one-eighth interest and an accounting.

I. Logically the first ground for attack upon the bill which should be considered is whether there is ah absence of necessary parties. It is strongly urged that the United States is an indispensable party because section 30 of the Oil Leasing Act (Comp. St. Ann. Supp. 1923, § 4640y^oo) provides “that no lease issued under the authority of this act shall be assigned or sublet, except with the consent of the Secretary of the Interior,” and that an assignment of an undivided one-eighth interest in the lease is prayed for in the bill. It is most probable that the matter primarily intended to be covered by this statutory provision was a voluntary change by the lessee of, his relations to the lease through assignment or subleasing. . However, the situation is not similar to that where a patent has been issued to public lands and the dispute arises between the patentee and some one else as to the right to the land and. patent. In the latter case, the government has parted with all interest in its property and is not further concerned, in a proprietary sense, in the ownership. The’ contest is purely between private parties and it in no way affects the government how that contest may terminate. In the matter of oil leasing under this act, however, there is another situation. Here the government has not parted with its property. It has merely contracted away a right of exploitation for a limited period, this exploitation to be done (according to the terms of section 32 of the act) under necessary and proper rules and regulations safeguarding the interest of the government and securing the performance of the contract. The act gives a preference in application for leases to those having existing placer claim rights to the land in question; but even such preferred persons cannot secure such leases and the benefit of the act unless and until they comply with the “necessary and proper rules and regulations” authorized by section 32 of the act.

While the courts may decide who is entitled to preference (as placer claim locators) under the act and may correct the department where its decisions in that respect are erroneous in matters of law, yet the person thus found to be entitled to this preference is in no better position than if his right had been freely recognized by the department in the first place. He must still qualify, under such department rules and regulations, before he can occupy the status and secure the benefits of a lessee. While not advised in this regard as to what regulations, if any, the department had or has in force governing these leases, yet the power and authority given by the act .to prescribe sueb and the direct requirement, in the act itself, that no assignment shall be made without the consent of the department clearly evinces the legislative concern in the control by the department of these leases and the operation under them so that the public rights may be safeguarded and enforced. On the other hand, it may be said, section 18 provides that “all leases hereunder’ shall inure to the benefit of the claimant and all persons claiming through or under him by lease, contract, or otherwise, as. their interests may appear, subject, however, to the same limitation as to area and acreage as is provided for claimant in this section.” The words “or otherwise” in the. above quotation would seem broad enough to cover a claim that the lessor was a trustee. This matter is not free from doubt, but I am inclined to think that the fact that the interest claimed by appellant is an undivided interest in minerals in place is a material and, possibly, a determinative consideration. If the appellant is, as he alleges, a tenant in common in such property, the right would exist, if the property were privately owned, in any tenant to exploit it, provided he accounted to his cotenants for their shares of the net results. It would be possible legally to segregate and divide the undivided interest in such property when and in so far as mined. If the property involved, instead of being privately owned, is a part of the public domain which can be exploited only as allowed by law, and if one of the cotenants has secured this exclusive right to exploitation it would seem that an aeounting for the net results would not in any wise affect the lessee or the government in its relation thereto and that a lease of this character would, in its very nature, be indivisible and therefore unassignable in part.

If appellant, as a cotenant, wished to exploit his property, he might or might not be able to obtain a lease to do so. But if it were possible for him to so operate and his one-eighth interest were freely recognized, he would yet have to account for seven-eighths of his net results from production just the same as he is now asking appellees to account for and recognize his right to one-eighth of their net production.

. Appellant’s prayer is clearly in the alternative and intended to cover situations both of a trust relation and of a cotenant relation. My judgment is that his allegations, if establishing a cotenancy in the placer mining claim, could result only in establishment of a trust relation as to this lease. If this be true, and the result of that relation is solely that appellees shall account to him for one-eighth of the net results of operations under the lease, I do not see how the government is interested or affected by this controversy. Therefore, I think the United States is not a necessary party.

II. It is next contended that the award of the government lease under the Oil Leasing Act was an adjudication in rem, binding upon the courts. I cannot accept this contention.' It may be conceded that the department is given authority to determine questions of fact as to who comes within the various terms and classifications of the act, but the department is not permitted to mistake the law which it is authorized to apply. It is always allowable for a dissatisfied party to have the proper court examine the action of a department to ascertain whether the interpretation and application of the law by it has been correct. Appellant challenges this action of the department in that respect, alleging that upon the facts before the department and upon which it acted and which he does not challenge, it misapplied the law. This he is entitled to have examined.

III. It is also claimed that the cause of action is barred by the limitation contained in section 18 of the Oil Leasing Act, wherein it is provided that such placer claimants may “upon relinquishment to the United States, filed in the General Land Office within six months after the approval of this act, of all right, title and interest “ * s be entitled to a lease thereon. 0 81 ” The claim is that as neither appellant nor his predecessor made any assertion of their rights within the above six-months period, they are barred from any participation or interest in the lease or its proceeds. I think that such is not the meaning of the statute. If appellant were seeking to obtain a lease from the government he might well be barred by this language; but what he is asking is not something additional from the government but to have declared and enforced an interest, which he claims to have, in a lease granted by the government within the six-months period. The purpose of the above limitation seems to be to fix a period within which those claiming existing placer mining rights may assert them and establish their preference to leases over others who might want to apply for permits, under this statute, to explore land on the public domain.

IV. It is claimed that the bill is, under its allegations, barred by the statute of limitations of the state of Wyoming. I do not understand that federal courts are bound by state statutes of limitations in actions in equity, although such state statutes may have' much bearing on the matter of laches as to influence federal courts in equity cases often to act in analogy with such statutes. Ide v. Carpet Co., 115 F. 137, 148, 53 C. C. A. 341 (this court). This disposes of the contention that the court is bound by the statute of Wyoming and that statute becomes pertinent only in connection with the next ground, which is laches.

V. It is strongly contended that this bill is barred by laches. The material allegations of the bill bearing on this contention seem to be as follows: Appellant alleges that he and his colocators were in possession and did the usual work required by the placer mining claim laws from the location of the claim in 1887 down to the present time and that they were in open, notorious and adverse possession down to and including the time when the land was withdrawn by executive order, and that order was not recalled until February 25,1920, when the Oil Leasing Act was enacted. The conveyances made by Cy Iba of an undivided one-half interest in the claim in 1890 can hardly be urged as constituting any color of title to the one-eighth undivided interest of McManus; particularly as five of the other locators had given Iba a power of attorney in 1886 while McManus had never given such authority except to Iba and Fales jointly. Had this been the only conveyance made by Iba, it must be presumed that it would have been of those undivided parts which he had authority to convey rather than of that part which he, acting alone, could not legally convey. Therefore, the bill does not allege any fact which even in its most unfavorable interpretation, could be construed as adversely affecting the title or interest of McManus until Iba undertook to convey a second one-half undivided interest to Joseph H. Lobell on April 12, 1905. But these conveyances alone, if Iba had no legal authority to transfer the McManus interest,, could not affect that interest unless there had been such an assertion of title by the grantees as to amount to adverse possession or to require opposing action by McManus to prevent laches in the assertion of his rights. The bill alleges that McManus and his eo-Io-eators had possession at all times and particularly to the time when the withdrawal proclamation became effective. While I have not been able to procure the withdrawal proclamation to ascertain just what effect it would’ have upon the exercise of the rights of placer claimants to land covered by the proclamation, yet I apprehend it must have prevented, from the time it became effective until the passage of the Oil Leasing.Act (from 1909 to February 25, 1920), any exercise of rights in respect to mineral claims on such land. If that be true, there could, during that period, be no possession or adverse possession by any one in so far as placer minerals were concerned and that period should be regarded as a suspension of rights and duties of rival claimants in respect to such property. The only indication in the bill of any action by either party during that period are the broad statements that McManus and his colocators kept up their work and kept possession continuously ; the statements quoted from the letter and decision of the Land Commission in connection with the granting of the lease to the effect that, “on May 15, 1918,- the aforesaid applicant company filed mineral application No. 016998, Douglas Series, for' said land, and by letter ‘FS’ of December 8, 1919, it was ordered that adverse proceedings be had in said case, but the application was withdrawn, and by letter ‘FS’ of March 25, Í920, the case was closed”; the further statements in the same document, that “the status of the fee title to the claim was considered by this office in the letter ‘FS’ of December 8, 1919, in 'regard to the mineral application aforesaid, and it was held that the title in the land was as follows: Federal Oil & Development Company, ten-sixteenths interest; M. Iba, one-sixteenth interest; H. T. Snively, one-sixteenth interest; George Mc-Manus, one-sixteenth interest; Perry Doan, one-sixteenth interest; William F. Ford, one-sixteenth interest; George B. Hall, one-sixteenth interest.” I think we have no right to conclude from the hill that there was any adverse possession on the part of the appel-lees or their predecessors (Victoria A. D. Johnson and the Lobells) during this period or that there was any assertion of rights, which would call into play a necessity for McManus or his heirs asserting themselves untih application of the Company May 15, 1918, as quoted above; and the adverse proceedings declared in that case seem to have continued until March 25, 1920, when the ease was closed. No further movement on the part of appellees is evidenced in the bill until the application made on August 21, 1920, for this lease. The granting of the lease was not approved by the Secretary until April 1, 1921, and this bill was filed May 26, 1922.

A very essential element in laches is knowledge. The allegation of the bill is that there was no knowledge on the part of the heirs of McManus of any of their rights until February 11, 1922, about three months before the bill was filed. When it is considered that this claim was located in 1887, that McManus died in 1901, that the land was withdrawn by the government from 1909 to 1920, and that development therein was suspended from 1909 until after April 1, 1921 (the date of the lease), and when it is borne in mind that none of the heirs lived near the property or in the state, I am doubtful if such laches appears on the face of the bül as would justify its dismissal. It may be that when issues are joined and evidence introduced this will be shown, but that is not now before ^us.

I think the decree of dismissal should be reversed, with instructions to set aside the order of dismissal and reinstate the case for such action as counsel may be advised.


source: Caselaw Access Project

author: KENYON, Circuit Judge.

license: Public Domain

text:
    HUMMEL v. WARREN STEEL CASTING CO.
    (Circuit Court of Appeals, Eighth Circuit.
    March 20, 1925.)
    No. 6750.
    1. Corporations <@=>388(I) — Rule as to availability of estoppel against defense of ultra vires, stated.
    If transaction was prohibited by law or by the charter right under which the corporation was doing business, or if wholly beyond its power in carrying on business, it was void, and doctrine of estoppel would not apply to defense of ultra vires; but, if it was merely an excessive exercise of the power to carry on its business, it would be merely voidable, and doctrine of estoppel against defense of ultra vires could be employed.
    2. Courts <@=>366(7)— Decision of state Supreme Court as to when defense of ultra vires is available to corporation followed by federal court.
    Decision of state Supreme Court as to when defense of ultra vires is available to corporation will be followed by the federal court.
    3. Corporations <@=>464 — Could execute trade acceptances to 'Carry on own business.
    Under Const. Mo. art. 12, § 7, a Missouri corporation had a right to execute trade acceptances to carry on its own business.
    4. Corporations <@=>374 — Transactions incidental to powers authorized by charter not ultra vires.
    Whatever may be fairly regarded as incidental to those things authorized by the charter of a corporation will not be held to be ultra vires in the strict sense of the term unless expressly prohibited.
    5. Corporations @=>388(2) — Corporation held estopped to- defend on ground that transaction was ultra vires.
    Where 95 per cent, of the stock of corporation was owned by partners engaged in other business, and the corporation was the fiscal agent of the partnership, had use of its working capital, received checks sent to partnership, and was indebted to partnership in substantial sum, trade acceptances executed by corporation to partnership’s creditor benefited corporation, in that it permitted corporation to use partnership’s funds, and the corporation was therefore estopped, in action on acceptances, to defend on ground that transaction was ultra vires.
    Appeal from tlie District Court of the United States for the Eastern District of Missouri; Charles B. Davis, Judge.
    Claim by Fred E. Hummel, trustee, etc., against the Warren Steel Casting Company, bankrupt. Judgment for defendant, and plaintiff appeals.
    Reversed and remanded, with directions.
    Clarence J. Silber, of Chicago, Ill. (Leo S. Rassieur and Charles D. Long, both of St. Louis, Mo., on the brief), for appellant.
    Robert Burnett, of St. Louis, Mo. (Stem & Burnett, of St. Louis, Mo., on the brief), for appellee.
    Before STONE and KENYON, Circuit Judges, and SCOTT, District Judge.
   KENYON, Circuit Judge.

Appellant is the trustee in bankruptcy of the James S. Miller Company (a corporation incorporated under the laws of the state of Illinois, engaged in business in' Chicago), bankrupt. Appellee is the Warren ,Steel Casting Company, a corporation of the state of Missouri, also bankrupt (hereafter referred to as the bankrupt). The Mid-Continent Foundry & Manufacturing Company (hereafter designated as the partnership) was organized in the summer or fall of 1919, with the expectation of later incorporating. The partners were Charles E. Hayden, J. P. Pero, Max Broad, and W. A. Kemmerer. These partners owned 95 per cent, of the stock of bankrupt; Charles E. Hayden being president thereof, J. P. Pero vice president, Max Broad 'secretary, and W. A. Kemmerer treasurer. The partnership was engaged in the business of manufacturing gray iron eastings. The bankrupt engaged in the manufacture of steel eastings. All checks coming to the partnership were indorsed and deposited in the bank account of the bankrupt. The partnership maintained no bank account. The bookkeeper of the bankrupt looked after the books of the partnership until the date of bankruptcy. The payment of his salary was divided between the two. Their offices and business were more or less intermingled'. The premises occupied, by the partnership were owned by a corporation, the stockholders of which were substantially the same as the stockholders of the bankrupt. The partnership had an open account with the James S. Miller Company. Mr. Miller came from Chicago to St. Louis to try to secure a settlement of his company’s account, which arose from the purchase of iron' scrap liy the partnership. He made certain arrangements with relation to this indebtedness and received trade- acceptances from the bankrupt, one of which is here set forth as a sample, viz.:

“Exhibit B.
“October 7, 1920. No.......
“November 10th after date pay to the order of ourselves $1,684.35 sixteen hundred eighty-four and S5/ioo dollars. The obligation of the acceptor hereof arises out of the purchase of goods from the drawer.
“The James S. Miller Co.
“John T. McEnroe, Secretary. “Warren Steel Casting Co., St. Louis, Mo.
“Accepted.
“Date: October 7, 1920 (date accepted).
“Payable at Night & Day Bank.
(Designate bank or) “Location of bank: St. Louis, Mo.
(Place of payment) “Signature: Warren Steel Casting Co., by
C. E. Hayden (signature of acceptor).”

The other two acceptances in controversy were for the sums of $1,684.35 and $1,684.44 respectively. There was another acceptance representing an accumulation on open account, which was paid later by the Warren Steel Casting Company. When the Warren Steel Casting Company became bankrupt, it owed the partnership about $17,000. The claim of the trustee on these acceptances was originally allowed by the referee, but later upon motion of the bankrupt a-re-examination was made by the referee and the claim was reduced from $5,863.20 to $711.82; that sum not being questioned. The dispute here is over the three trade acceptances aggregating, with interest, $5,151.38; the same being disallowed by the referee, and his action sustained by the District Court.

It is the claim of the bankrupt that its execution of the trade acceptances is ultra vires and void.

Appellant, trustee, claims that the contract giving rise to the trade acceptances was fully executed by the James S. Miller Company; that the consideration therefor was received and retained by the bankrupt; and that the bankrupt is estopped on equitable principles from invoking the defense of ultra vires. The statement of these two positions illustrates the points in controversy. The following principles applicable to this situation are, we think,' abundantly sustained by authority and reason.

If the transaction between the bankrupt and the Miller Company was prohibited by law or the charter right under which bankrupt was conducting business, it was void, or if it was wholly beyond its power in carrying on its business it was void, and the doctrine of estoppel will not apply to a defense of ultra vires under such circumstances. However, if it was merely an excessive exercise of the power to carry on its business, it would at most be merely voidable, and the doctrine of estoppel as against the defense of ultra vires could be employed. In other words, if the transaction falls without the limits of a voidable contract, there can be no estoppel to the defense of ultra vires. We refer to some of the cases dealing with these propositions.

The Supreme Court has held, in the very leading case of Central Transportation Company v. Pullman’s Palace Car Company, 139 U. S. 24, 59, 60, 11 S. Ct. 478, 488, 35 L. Ed. 55, that a contract absolutely ultra vires in the proper sense is void, and that neither the corporation nor the other party can be es-topped to show it was prohibited by law, saying: “A contract of a corporation, which is ultra vires, in the proper sense, that is to say, outside the object of its creation as defined in the law of its organization, and therefore beyond the powers conferred upon it by the Legislature, is not voidable only, but wholly void, and of no legal effect. The objection to the contract is, not merely that the corporation ought not to have made it, but that it could not make it. The contract cannot be ratified by either party, because it could not have been authorized by either. No performance on either side can give the unlawful contract any validity, or be the foundation of any right of action upon it. * * * But when the contract is beyond the powers conferred upon it by existing laws, neither the corporation, nor the other party to the contract, can he estopped, by assenting to it, or by acting upon it,'to show that it was prohibited'by those laws.” i

This court in Anglo-American Land, Mortgage & Agency Co., Ltd., v. Lombard, 132 F. 721, 736, 68 C. C. A. 89, 104, in discussing the matter arising in a controversy between a Missouri corporation and a Kansas corporation, said: “Whatever may have been the effect of the transaction in other respects, it was in this respect beyond the pow- • ers of the Missouri Company, and void. The settled rule is that a corporation possesses only such powers as are expressed or fairly implied in the statute by or under which it is created; that the enumeration of these powers implies the exclusion of all others; and that any ambiguity or doubt respecting the possession of any particular power arising out of the terms used in the statute, is to be resolved against its possession. This rule is fully recognized in the state of Missouri.” The court also referred to the absence of any established rule of decisions in Missouri in respect to ultra vires acts of corporations.

Since the decision in the above ease, the Supreme Court of Missouri, in First National Bank of Kansas City v. Guardian Trust Company, 187 Mo. 494, 525, 86 S. W. 109, 117, 70 L. R. A. 79, has dealt with the question here involved. This was a ease where the sum of $25,000 was borrowed by the Kansas City Suburban Belt Railroad Company from the First National Bank of Kansas City, and the note was indorsed by the Guardian Trust Company. It was the contention that the note was merely for accommodation; was without consideration and of no direct benefit to defendant, and therefore ultra vires and void. While there is some difference between the powers of the Guardian Trust Company granted by the law, under' which it was operating, and the powers of the bankrupt here, the difference is rather in favor of appellant’s position than against it. In that case the court said: “The contract in this case was fully executed on the part of the plaintiff and its money was parted with by reason of the execution of the note by the defendant. This being true, the question confronts us: Should the defense of ultra vires as interposed by the defendant be availing under the facts as disclosed by the record? We have reached the conclusion that it should not be. It may be conceded that under the powers conferred upon the defendant by the statutes under which it was organized, it would not be authorized to simply engage in the business of becoming a purely accommodation maker or indorser of promissory notes. Upon the facts in this case, this legal principle is not applicable to the questions herein presented.” The court referred with approval to the language of Whitney Arms Co. v. Barlow, 63 N. Y. 62, 20 Am. Rep. 504, as follows: “One who has received from a corporation the full consideration of his engagement to pay money, either in services or property, cannot avail himself of the objection that the contract thus fully performed by the corporation was ultra vires, or not within its chartered privileges and powers. It would be contrary to the first principles of equiiy to allow such a defense to prevail in an action by the corporation. It is now very well settled that a corporation cannot avail itself of the defense of ultra vires when the contract has been, in good faith, fully performed by the other party, and the corporation has had the full benefit of the performance and of the contract. If an action cannot be brought directly upon the agreement, either equity will grant relief or an action in some other form will prevail.”

Prior to the decision in First National Bank of Kansas City v. Guardian Trust Co., supra, there was some confusion in the Missouri decisions on the subject of the defense of ultra vires transactions. This decision seems to have clarified the judicial atmosphere, and as a holding of the highest judicial authority of Missouri the rule there established on the question here involved will be followed by the federal court.

Was' the transaction in controversy here void as one prohibited by law? The provi-*’ sion of the Missouri Constitution which ap-pellee claims makes it so is as follows: “Article 12, § 7: ‘No corporation shall engage in business other than that expressly authorized in its charter or the law under which it may have been or hereafter may be organized. * * * ’ ”

The Supreme Court of Missouri, in Joseph Schlitz Brewing Co. v. Missouri Poultry & Game Co. et al., 287 Mo. 400, 408, 229 S. W. 813, 815, referring to the same claim, that the action of the corporation was in violation of the quoted section, said: “It is argued the provisions of section 9749, R. S. 1919, and section 7 of article 12 of the Constitution of the State to the effect that ‘no corporation shall engage in business other than that expressly authorized in its charter or the law under which it may have been or may hereafter be organized’ preclude a holding that defendants are estopped to set up that the contract in this case was ultra vires of the Poultry & Game Company. The provisions quoted were in existence at the time the cited decisions of this court were made, and the doctrine of estoppel has been applied when the constitutional provision mentioned was before the court. Summet v. Realty & Brokerage Co., 208 Mo. loc. cit. 512, 513, 106 S. W. 614. In fact, the violation of some restriction upon the exertion of power by a corporation is the essence of ultra vires action. It would be-strange if this court and the Courts of Appeals would so often apply the doctrine of estoppel in the face of the provisions quoted if their effect is to render that doctrine inapplicable in this state. Such is not the case. The question is one often decided. Those provisions but incorporate the applicable common law, which is that corporations are restricted to the powers given by their charters. The exception to the general rule of estoppel made in case a charter or provision of law ‘expressly’ prohibits the making of a contract by a' corporation cannot be grounded upon the common law or provisions declaratory of it, as are those quoted.” See, also, St. Avit et al. v. Kettle River Co., 216 F. 872, 133 C. C. A. 76, where this court discusses the same provision.

In view of these decisions, it is apparent that the provision of the Missouri Constitution cited does not expressly prohibit the transaction here involved. Nor does the charter right to do business under the Missouri statute prohibit it. Whatever may be fairly regarded as incidental to those ¿.things authorized by the charter of a corporation will not be held to be ultra vires in the strict sense of the term unless expressly prohibited. Undoubtedly the bankrupt could have given negotiable paper or trade acceptances to carry on its own business. Such power existed. 10 Cyc. p. 1098.

All ultra vires contracts are not void. The distinction between a contract merely in excess of the power of a private business corporation not forbidden by its charter or the law, and a contract .so forbidden, has been pointed out a number of times by this court as well as by the courts of other jurisdictions.

In Lyon, Potter & Co. v. First Nat. Bank of Sioux City, Iowa, 85 F. 120, 122, 29 C. C. A. 45, 47, this court in discussing ultra vires of a commercial eorp'oration said that it was ultra vires of such a corporation to make accommodation paper, or to guarantee the payment of the obligations of others, and then said: “An indorsement of this character, ' however, is not malum in se, is not prohibited by statute, and is not beyond the general scope of the powers of such a corporation. It is merely an excessive exercise of one of those powers, — an excessive exercise of the power which it has, in proper eases, to make and indorse commercial paper. Where such an indorsement has been apparently made for the benefit of the eor-'p oration, and has been in fact made partly for its own benefit and partly for the accommodation of another, and the corporation has received and retained the benefits of the indorsement, the contract is not void, because it is no defense for a private corporation against the enforcement of an executed contract whose benefits it holds that, while its execution was within the general scope of its powers, it involved an excessive exercise of one of them. While such a corporation retains the benefits of such a contract, it silently affirms, and must not be permitted to deny, its validity.”

In Park Hotel Co. v. Fourth Nat. Bank of St. Louis, 86 F. 742, 747, 30 C. C. A. 409, 414, this court, holding that it was ul-. tra vires of a corporation to make accommodation paper or to guarantee the payment of the obligation of others, said: “If the hotel company had ever received any consideration for these notes, and if the bank had not had notice that the corporation received nothing for them, those facts would have removed the notes from the category of accommodation paper, and the corporation might have been estopped from denying their validity.”

In Evans v. Johnson, 149 F. 978, 980, 79 C. C. A. 488, 490, in holding a transaction of a bankrupt corporation ultra vires, the court said: “The state by whose authority a corporation is organized, the stockholders .who compose it, and its creditors whose demands have arisen in the course of its legitimate business are all interested in having it confined to the lawful exercise of its corporate powers. In this ease the creditors especially would suffer by adding to the liabilities of the bankrupt company the personal debt of its president. The company was organized to transact a mercantile business. It had no power under its charter to guarantee the debts of others, and in this ease it received and l-etained no consideration for doing so.”

In Mapes v. German Bank of Tilden, of Tilden, Neb., 176 F. 89, 90, 99 C. C. A. 609, 610, this court said: “The officers of a trading corporation undoubtedly have authority to make and deliver its promissory notes for the just debts of the corporation, and the acts of such officers in this regard are presumed to be lawfully done, when no notice to the contrary is received by the holder of the paper. But it is beyond the powers of the corporation and of its officers alike to make accommodation paper, or to guarantee or to pay the obligations of others in which it has no interest, and from which it derives no benefit.”

In St. Avit et al. v. Kettle River Co., 216 F. 872, 133 C. C. A. 76, this court held that even though a contract by a corporation was ultra vires, the right to compensation for work done thereunder was not defeated where the contract had been fully executed on its part.

In Wm. Filene’s Sons Co. v. Gilchrist Co., 284 F. 664, 665, the question was the right of the Filene Company to guarantee a lease to another corporation on neighboring premises. The court said: “The ease presents this plain question of fact: Has £he claimant proved by a preponderance of evidence that the execution of the guaranty by the Gilchrist Company was reasonably incidental and auxiliary to its business and within the scope of its powers?” Also page 669: “After a study of the whole record we are of the opinion that the claimant has fallen far short of proving, by a preponderance of the evidence, that the execution of the lease was incidental or auxiliary to the main business of the corporation and necessary or expedient to the protection, care and management of the Gilchrist Company.”

In George H. Davis & Others v. Old Colony Railroad Company, 131 Mass. 258, 275, 41 Am. Rep. 221, the railroad company and a musical instrument house guaranteed the payment of a musical festival. Held beyond power of the railroad company, the court saying: “The holding of a 'world’s peace jubilee and international musical festival’ is an enterprise wholly outside the objects for which a railroad corporation is established; and a contract to pay, or to guarantee the payment of, the expenses of such an enterprise, is neither a necessary nor an appropriate means of carrying on the business of the railroad corporation, is an application of its funds to an object unauthorized and impliedly prohibited by its charter, and is beyond its corporate powers. Such a contract cannot be held to bind the corporation, by reason of the supposed benefit which it may derive from an increase of passengers over its road, upon any grounds that would not hold it equally bound by a contract to partake in or to guarantee the success of any enterprise that might attract population or travel to any city or town upon or near its line.” See, also, Frank I. Chenoweth v. Pacific Express Co., 93 Mo. App. 185; Smith v. Richardson, 77 Mo. App. 422; Ellett-Ken-dall Shoe Co. v. Western Stores Co., 132 Mo. App. 513, 112 S. W. 4; Newland Hotel Co. v. Lowe Furniture Co. et al., 73 Mo. App. 135.

Nearly all of the eases cited by appellee are where there was a gratuitous assumption of an obligation by a corporation of the debt of a third party, with no benefit or consideration received therefor — for instance, in the leading case cited, Western Maryland Railroad Company v. Blue Ridge Hotel Co., 102 Md. 307, 335, 62 A. 351, 357, 2 L. R. A. (N. S.) 887, 111 Am. St. Rep. 362, there was involved a guaranty by defendant of interest and payment of bonds of plaintiff; consideration being the location by plaintiff of hotel on line of defendant railroad. The act was held ultra vires, the court saying: “In this case, there is but one count in the declaration, and that is upon the void contract, and the proof is clear that the railroad company never received from the hotel company, either directly or indirectly, any money or property whatever under this contract. The only money it has received as a result of the contract,-is that paid by passengers for transportation over its own road, or for freight carried over the road. The hotel company has paid nothing, and parted with, nothing under this contract, and is therefore under all the authorities without any right of action.”

It is also to be noted that the contracts, giving rise to the trade acceptances were fully executed by the Miller Company.

The courts of Missouri have frequently held that the defense of ultra vires is not open to a corporation where the contract has been fully executed on one side, unless it is a contract expressly prohibited by law. Joseph Schlitz Brewing Co. v. Missouri Poultry & Game Co. et al., 287 Mo. 400, 229 S. W. 813; Winscott v. Guarantee Investment Co. of Nevada, Missouri, 63 Mo. App. 367; First Nat. Bank of Kansas City v. Guardian Trust Co., 187 Mo. 494, 86 S. W. 109, 70 L. R. A. 79; Cass County et al. v. Mercantile Town Mutual Ins. Co., 188 Mo. 1, 86 S. W. 237; Common Sense Mining Co. v. Taylor, 247 Mo. 1, 152 S. W. 5; Ellett-Kendall Shoe Co. v. Western Stores Co., 132 Mo. App. 513, 112 S. W. 4.

In Hanlon Millinery Co. v. Mississippi Valley Trust Co., 251 Mo. 553, 579, 158 S. W. 359, 364, which is perhaps the strongest authority cited by appellee, the court said: “If the contract were only executed upon one side, then the plea of ultra vires would be unavailing, because a corporation cannot receive money to do a thing and fail to do that thing, and after keeping the money, excuse itself from liability by a plea of ultra vires.”

We think this controversy is reduced to the question of whether the trade acceptances were solely for the benefit of the partnership — a mere guaranty of its debt — or whether there was a direct resultant benefit to the bankrupt. If the' former, the transaction was void, and estoppel will be unavailing to the defense of ultra vires; if the latter, it was merely voidable and estoppel would lie. This requires consideration of the facts. It appears that the partners in the Mid-Continent Foundry & 'Manufacturing Company, which we have designated as the partnership, owned 95 per cent, of the stock of the bankrupt, and the officers were practically identical; that the bankrupt acted as the fiscal agent of the partnership, had the use of its working capital, received all the cheeks which were sent to the partnership, the same being indorsed by Hayden, president of the bankrupt concern and one of the partners of the partnership concern; that the partnership had no bank account; that merchandise was purchased for the partnership by Mr. Broad, who was secretary of the bankrupt, and the bills therefor were sent to the partnership, submitted by Broad to Hayden, turned over by Hayden to the bookkeeper of the bankrupt, and a check therefor signed by Hayden and Kemmerer. This was the method by which the bills were paid. Hayden was president of the bankrupt, and sole salesman for the partnership. During the time of the transaction involved in these trade acceptances, the bankrupt was indebted to the pamership in a substantial sum. We think the evidence fairly discloses'that such indebtedness was more than the unpaid acceptances. The premises occupied' by the partnership were owned by a corporation, the Denero Realty & Manufacturing Company, the stockholders of which were largely the partners in the partnership, and stockholders in the bankrupt. The rent was paid by bookkeeping transfer of credits.

The partnership, Mid-Continent Foundry & Manufacturing Company, filed a claim in the matter of the bankrupt estate of the Warren Steel Casting Company of $16,955.18, signed and sworn to by Mr. Hayden, president of the bankrupt company. The bankrupt had on some occasions paid from its fund notes executed by the Mid-Continent Foundry & Manufacturing Company, payable to James S. Miller Company. At the time of the transaction in question, Mr. Miller came from Chicago, evidently to secure the account of his company, or the money. Mr. Broad acquainted Mr. Hayden at his office with the fact that Mr. Miller was there, and asked if trade acceptances would be given. The record shows that Mr. Hayden said, “Yes, tell the bookkeeper to make them up.” The acceptances were given at that time. It is apparent also that bankrupt received a direct benefit in that, having the use of the partnership funds, by giving the trade acceptances, it secured further use thereof without diminution of the amount. These funds which it had on hand for its use were created in part by the sales of the partnership. The sales of the partnership presumably included goods, or articles manufactured therefrom, that the Miller .Company sold to it, the purchase price of which the trade acceptances represented. Whether the bankrupt received credit for these acceptances on its indebtedness to the partnership, the evidence does not disclose. There is no reason why it would not have done so. It had paid obligations to the Miller Company in the past on the part of the partnership. By these acceptances the Miller Company did not assume further to collect from the trustee. Had they proceeded to collect and succeeded, instead of taking the trade acceptances, the bankrupt would have had that much less uSe of the money of the partnership. Further the forbearance to assert rights on open account, amounting to an extension of. time as to payment of the debt, entered into the consideration of the transaction. Certainly under these circumstances it cannot be claimed that out of this transaction there was not a benefit to the bankrupt. It makes no difference whether it be called unjust enrichment or something else. It was not only an indirect, but a direct, benefit. Consequently under the doctrine announced in First National Bank of Kansas City v. Guardian Trust Co., 187 Mo. 494, 86 S. W. 109, 70 L. R. A. 79, the defense of ultra vires should not prevail. We are not impressed with the suggestion that Mr. Hayden did not know what he was signing when he signed the trade acceptances.

This is a case governed by equitable principles. Under the circumstances shown by this record of a contract performed upon one side, which has resulted in direet benefit to the appellee bankrupt, and considering also the course of dealing between the partnership and the bankrupt and the practical identity of owm • 'hip and control, it would be unconscionable to bar ,the trustee’s claim on the ground that the act of the bankrupt, although not prohibited by law or its charter right, but at most being merely an' excessive exercise of its power in accepting these trade acceptances, was ultra vires.

There is no complaint here on the part of the public, and there is no public interest or question of public policy involved. Under the Missouri decisions, it is somewhat doubtful if the question of ultra vires can be raised by any other party than by the state against the corporation. The Missouri courts have said “that the defense of ultra vires is never sustained out of regard for a defendant, but only where an imperative rule of public policy requires it.” First Nat. Bank of Kansas City v. Guardian Trust Co., 187 Mo. 494, 535, 86 S. W. 109, 121, 70 L. R. A. 79; Milton Welsh v. Ferd Heim Brewing Co., 47 Mo. App. 608. We are not called on, however, to determine this question, and do not.

The Supreme Court of the United States, in Ohio & M. Railway Company v. McCarthy, 96 U. S. 258, 267, 24 L. Ed. 693, said: “The doctrine of ultra vires, when invoked for or against a corporation, should not be allowed to prevail where it would defeat the ends of justice or work a legal wrong.”

The doctrine of ultra vires applied to the facts in this ease would work a legal wrong and would amount to a fraud upon the appellant.

The order of the District Court of May 12, 1924, should be reversed and the case remanded with directions to allow appellant’s claim as filed, and it is- so ordered.

Reversed.


author: MANTON, Circuit Judge.

text:
    CUTLER HAMMER MFG. CO. v. BEAVER MACHINE & TOOL CO., Inc. SAME v. DAVID KILLOCH CO.
    (Circuit Court of Appeals, Second Circuit.
    January 5, 1925.)
    Nos. 60, 61.
    1. Patents @=328 — 1,162,864, for electric switch, held invalid, in view of prior art.
    Patent No. 1,162,864, for electric switch, held invalid, in view of state of prior art.
    2. Patents @=172 — Patent cannot issue for invention covered by former patent.
    No patent can rightfully issue for invention actually covered by former patent, especially to same patentee, though terms of claim may differ.
    3. Patents @=20, 26(1) — Change of form or design is not “invention.”
    Putting an old form of electric switch into an old form of casing is not invention, nor will change of form or design, so as to make device smaller, different in shape, or more compact, amount to invention.
    [Ed. Note. — For other definitions, see Words and Phrases, First and Second Series, Invention:]
    4. Patents @=328 — 1,353,124, for electric switch, held invalid, in view of prior art.
    Patent No. 1,353,124, for electric switch, held invalid, in view of state of prior art.
    Appeals from the District Court of the United States for the Eastern District of New York.
    Patent infringement suits by the Cutler Hammer Manufacturing Company against the Beaver Machine & Tool Company, Inc., and against the David Killoch Company. Frojn the decree rendered, all parties appeal.
    Reversed in part, and in part affirmed.
    Arthur B. Seibold and W. Clyde Jones, both of Chicago, Ill. (Everett N. Curtis and Frank W. Hubbard, both of New York City, of dounsel), for plaintiff.-
    Samuel Owen Edmonds, of New York City, for défendants.
    Before” HOUGH and MANTON, Circuit Judges, and LEARNED HAND, District Judge.
   MANTON, Circuit Judge.

The parties herein will be referred to as below. The defendants appeal from that part of the decree entered which holds valid and infringed the first patent, No. 1,162,864, and plaintiff appeals from that part of the decree which holds invalid patent No. 1,353,124.

The first patent was granted December 7, 1915, and the second September 14, 1920, and each is for an electric switch. The earlier patent, the inventor says, has among its objects to provide an improved switch of exceedingly simple, efficient, and inexpensive construction, and a further object is to provide improved means for supporting and inclosing the switch mechanism. He says:

“By my improved construction I have been able to provide a switch device which is of a compact and rugged construction, and in which the parts are so constructed and arranged as to permit a long use in service. Further, the switch easing is of a convenient form, and presents a symmetrical appearance, and may be readily connected and disconnected from the conductors when desired. * * Rurther, the conductor which extends through the switch casing is securely clamped in the same, and the arrangement of the casing is such that the weight of the switch mechanism does not rest upon the contact screws. Further, by the provision of the insulated washers in the ends of the easing, the conductors are held securely and snugly in place, and are' prevented from rubbing and wearing their insulation.”

Claims 2, 3, 4, 5, 7, and 8 of the first patent are relied upon, and are as follows:

“2. In an electric switch, a switch mechanism of the push button type, a two-part casing having tapering ends, terminal contacts for said switch mechanism carried in a recess in one of the parts of said casing having a body portion lying flat on the bottom of said recess on opposite sides of said switch mechanism and contact surfaces bent substantially at right angles to said body portions.
“3. In an electric switch, a snap switch mechanism of the push button type, a two-part easing inclosing the same'having reduced tapered ends provided with the grooves, and a groove in one of the parts of said casing ■communicating with the grooves in the ends of the same, and terminal contacts for said switch mechanism carried by one of the parts of said casing and arranged on" opposite sides of said switch mechanism.
“4. In an electricf switch, a snap switch mechanism of the push button type, "a casing inclosing the same having reduced tapered ends provided with grooves and a groove extending through said casing and communicating with the grooves in its ends, terminal contacts carried by one of the parts of said casing having bent contact surfaces located in a plane parallel with the plane of movement of said switch mechanism.
“5. In an electric' switch, a snap switch mechanism of the push button type, easing inclosing the same terminal contacts for said switch mechanism insulated from each other and carried in recesses in said casing adjacent its ends, said terminal contacts having bent contact surfaces lying in a plane substantially parallel with the plane of movement of said switch mechanism.”
“7. In an electric switch, a snap switch mechanism, a two-part easing inclosing the same and having conductor opening in its opposite ends, one of the parts of the casing carrying terminal members for the switch in the opposite ends of a recess in the same adjacent said openings while the other part of said easing is provided with means arranged to inclose the switch mechanism in a closed chamber, both of the parts of sai'd casing being arranged to guide and limit the movement of the operating parts of said switch mechanism.
“8. In an electric switch, a snap switch mechanism of the push button type, a two-part easing having conductor openings in its opposite ends arranged to guide the operating parts of said switch mechanism and establish the limits of their movement and having suitable recesses arranged to inclose said switch mechanism in a closed' chamber, terminal contacts carried by one of the parts of said easing on opposite sides of said switch mechanism adjacent' said openings and means for holding the parts of the casing together.”

The plaintiff claims this invention gave to the art for the first time k feed-through switch capable of being inserted in a flexible cord circuit, sandwich-wise, and medially of the ends of the cord and directly at the point of final location, wholly independently of the ends of the cord and without disturbing the plug at either end of the cord. This is said to be a new idea and that it produced a new result. The claim is further that switches of the prior art were invariably of what may be called the “thread-needle” type. It is said they could not be connected directly at the point of final location in the cord, but required that the plug at the end of the connecting cord be removed and the cord then threaded through parts of the device in order to bring the feed-through switch to the point of final location. The advantage of the plaintiff’s new device is that it may be located directly at the desired point, without disturbing the plugs at the end of the cord, and without threading the cord through any of the parts of the device. The argument is that it “requires ingenuity of a high order to work out a provision for accomplishing a threefold result, first, of isolating the through conductor from the switch mechanism, so that the latter may be operated without interference by the through conductor; second, compensating for the slack in the through conductor; and, third, insuring that strains placed upon the connecting cord will be taken by the through conductor and not imposed on the cut conductor, with possible pulling loose thereof from the binding posts.”

The purpose of the electric switch has always been to open and close (or make and break) the .electric circuit. Thus current control, no matter what used for, has brought into being the socket switches, receptacle switches, candlelabra switches, canopy switches, feed-through switches, both for pipe lines and for flexible wire lines, and many others differently named, but essentially the same as far as concerns the circuí t making and breaking mechanism. They are usually mounted upon insulation designed and fashioned to adapt that mechanism to one or the other particular use required. The first switches were of the slow make and break type. They were objectionable on account of are-ing. This type was superseded some years ago by the quick make and break type called the “snap” switch. This proved to he the favorite type for the past 20 years. The switch-operating means has taken a variety of forms; some have been operated by keys and by push buttons, sometimes one and sometimes two, the latter form being preferred- whenever it was desirable that the switch itself should show, by the position of the buttons, whether the current was on or off.

The inventor of the patents in suit appears to have been also the inventor of two different switch units, one known as the “garter-spring” type and the other the “hill and valley” type. The first was patented on February 28, 1911, and the latter on May 23, 1916. He took each unit in its turn and employed it in the lamp socket device and also in the pendant switch. The plaintiff then claimed that this line of push button specialties, which were made possible by these earlier inventions of Klein, were a “snap” switch mechanism, which, by reducing the number of moving parts, permitted a thoroughly substantial quick make and break switch of ample current-carrying capacity to be installed in a pendant switch body or socket shell of small dimensions, and mentioned the various switches above referred to. Both of these units for which patents have been obtained, and which are not in issue here, made it possible for an experienced designer of particular forms of well-known devices in which switch units are required to design a line of such devices differing from each other almost wholly with respect to the fashioning of the insulation in which the metallic parts of the switch units were mounted. This was within the accepted skill of the calling. The inventor here had appropriate designs of sockets, pendants and feed-throughs, in which such a switch unit could practically be mounted.

In the first patent in suit, the garter spring switch shown in Klein’s earlier patent, No. 985,421, is used. The insulating ease is made pf two halves adapted to be clamped together by screws. The terminal contacts of the switch, which are stationary, are permanently combined with one of these insulating halves by being fixed to the casing by suitable screws, which extend through to the other side of the base. The inner edges of the contact members are bent inward substantially at right angles, and with these bent portions the contactor eoaets with the wiping action. The contact members are mounted in the recesses. By also recessing the adjacent faces of the insulating halves, a chamber for the switch mechanism is formed. Communicating with this chamber are holes for the push buttons of the switch. These holes guide the push buttons. The movement of the contactor is limited by the recess or cavity in which it works; the movement in one direction being limited as in the other direction by stops. This construction is disclosed in the claims in issue, and they indicate a difference in design from the pre-existent structures of Klein. The claims require that one of the parts or casing carry the switch mechanism; the specification and the drawing make this clear. The terminal contacts are carried by the easing and in the course of factory production are fixed to it by the screws as described in the specifications and shown in the drawings.

We fail to see invention in this change of structure in view of the state of the prior art. The patent to Bergman, No. 385,539, granted July 3, 1888, disclosed a sandwich-type feed-through switch. It seems to be a progenitor of all the switches of that type now on the market. There has been departure in details from Bergman’s precise design as respects the details of the switching mechanism, but the essentials of the sandwich-type switch are disclosed. He says they are “made in two parts joined along the vertical center and secured together by screws or similar means, giving the facility of quickly taking it apart for repairs or the insertion of the circuit wires.” The through wire has its own individual groove or channel, one-half in each of the insulating parts. This is true of the switch wire. The switch is “pivoted in a slot formed in the block” and its end “is allowed to project through one edge of the block far .enough for convenient operation, and is provided with an insulating knob for grasping with the hand as shown” in the drawing, and Bergman says “it is well fitted for use at any point at which a switch is desired to make and break an electric circuit.” The criticisms of the Bergman patent, when considered as an anticipation of the patent in suit, are not well founded. The inventor here was preceded by Bergman in the “sandwich-type” switch and other patents in the prior art, as are shown, not only by the Bergman, but by the Starr and Batcheller, patents.

The prior art was not confined to switches of the so-called “thread-needle” type. The advantage of the “sandwich-type” switch is that it may be connected with the circuit without disturbing the plug at either end of the cord. The “thread-needle” switch requires that the plug at one end of the cord be disconnected and passed through the switch after which the plug must be reconnected to the cord. Switches of both types are today in active demand and use.

The history of the application in the Patent Office shows that, as finally allowed, claim 8 indicates a combination which admits to have been old — all the fundamental features and characteristics — and this apparently was forced upon the patentee by the disclosure of the prior art in the Patent Office. The longitudinally divided easing referred to in' the claims refers to the sandwich form of insulating support. But this was in Bergman’s and was utilized by Starr and Bateheller. In mounting the garter-spring switch, so as to be useful as a feed-through switch, the inventor took one of the well:known longitudinally insulted casings and suitably recessed it to receive the metallic parts. Since the garter-spring switch was of a peculiar design, the recesses made to receive it had to be correspondingly dimensioned. The prior art indicated all this. A central cavity for the conductor was shown by Starr and Bergman and Bateheller. Openings in the insulation in the hand operable part of the switch were equally shown and illustrations were shown in these prior patents. Independent grooves, one to receive the cut wire and the other the feed-through wire, were disclosed by Bergman and the equivalent practice was shown by Schulz. The common practice of having the feed-through wire running continuously through the switch, the other wire being cut, at its end, secured to suitable terminals co-acting with the current making and breaking element of the switch were in the Bergman and Hubbell structures.

The idea of facilitating assembling and making the switch easy of access for repairs by detachably screwing the two halves of the easing together by means of screws, was characteristic of the prior device of Bergman. It is apparent that what the inventor did to transpose his pendant switch of 1908 into the feed-through switch disclosed by his application filed three years after the former was to make both ends of the pendant switch symmetrical running the conductors in one end and out the other instead of having them .come in and leave by the same end. This involved no new means. Pendant feed-through switches have been known for years prior, and the difference between them resided wholly in the matter of ingress and egress of the wires. To change either form to the other form would not require more than a skilled mechanic’s efforts. The essentials of the construction covered by the claims of this patent were known to the inventor as indicated by his prior inventions, for which he has obtained patents. Indeed,, he readily relinquished claims to them while this invention was passing through the Patent Office. What is left over the prior art is the selection and adoption of features which might be considered a matter of design. We think there was no invention over what was disclosed in the prior art, and that the decree granted in favor of the plaintiff on this patent should be reversed.

The second patent, No. 1;353,124, has for its object to provide a switch of sifnple and compact construction and one of such external dimensions and shape as to be conveniently handled and to be attractive in appearance. More specifically it provided a switch wherein the switch parts and conductor passages are so arranged in insulating casing as to facilitate manufacture, assembly, inspection, and wiring. The second patent differs from the structure of the first patent in that, not only the binding posts, but also the push buttons for operating the switch mechanism are positioned in the plane of separation or cleavage of the two parts of the easing; the purpose of the new arrangement of the parts was to provide a more compact or smaller feed-through switch, and one which could be made at a relatively small price, and also one which could be effectively made of flat formation, so as to be capable of resting in a stable position on the support on which it happened to be placed, while at the same time having the switch-operating members readily accessible and conveniently operable. The advantages are said to be a more compact device, and also one which could be “made in waferlike or flattened form, so as to be capable of resting stably upon the support upon which it was placed, with the push buttons readily accessible for the operation of the device, but that end could .not be attained by simply making the first device smaller. To accomplish this compactness reorganization was necessary. * * * Stability of the switch upon its support, cheapness of manufacture, lightness in weight, and compactness in size were the desiderata in attacking the problem of the invention of the second Klein patent.”

All claims are sued upon. The patent is a reducing of the first patent in suit. The inventor already had a switch unit, the hill and valley type. This has been utilized in a line of devices of the plaintiff’s production. The feed-through switch of the first patent in suit, like the switches of Bergman, could be connected up without removing the plug or the appliance in order to pull the cord through it. The plaintiff then gave up the sandwich type and turned to the metal shell type (thread-needle switch), which are like other switches of that type in the prior art. The inconvenience involved is in connecting it úp; that is, removing either the plug or the appliance; but this was overcome by the so-called “footbaE” switch.. The inventor, on being instructed to return to the sandwich type, did not return to'his first switch of the footbaE type, for that had’ switch buttons at right angles to the joint. Then he adopted the longitudinaEy divided insulating case of the Bergman patent type, with the switch button in the joint. With the old Bergman casing and the hiE and vaEey switch unit which the plaintiff had been using for years, the task of designing the new devices of the second patent was merely a matter of rearranging the grooves and recesses of the footbaE switch, so as to adapt them to the hill and valley switch unit. It was the substitution of the Bergman casing for the first Klein casing, and the substitution of the hill and valley switch for the garter-spring switch. Both the first and second patents sued upon are essentiaEy the same, except in these two particulars. There are in both (1) the use of the moldable insulation; (2) the tapered end form; (3) the end openings for the conductors; (4) the continuous feed through a groove; (5) the terminal contacts and binding screws on either side of the switch; (6) the abutments to resist the crushing strain of the screws; (7) the guiding of the switch buttons by holes in the insulating casing; (8) the attachment of the insulating halves by screws.

This presented no difficulty or inventive problem to one skilled in the art. Putting the old switch in the Bergman old easing in such manner that it would acceptably perform the work, and substituting his double button switch for the Bergman single button switch, and arranging the grooving and recessing of Bergman’s insulating casing, thus suitably modifying it, so as to make a compact fitting switch, was not invention. At any rate, this problem seems to have been solved by Klein, the inventor, many years before the alleged conception of this second patent. The application for this second patent was filed November 24, 1916. His conception was in February, 1916. But prior to that date Klein had patented all the essentials of the switch now claimed to be covered by this patent in suit. The size and weight of the first patent seems to have been caused by the fact that the switch was put in at right angles to the joint between the casing halves. When the switch was placed in line with the joint, the switch button protruding through the joint itself, the difficulty was at once overcome. In this application, filed in 1911 and 1914, and on the patents, which were received in 1915, this new form was disclosed. Indeed, the Bergman patent in 1888 shows the switch mechanism arranged in line of the joint, the button protruding through the joint itself, precisely as disclosed in this second patent in suit. In the prior patent, Klein is shown to have designed a device which, while essentially the same as a feed-through switch, was speeificaEy different with respect to the contacts. He designed a switch socket to be used at the end of a cord, rather than a feed-through switch to be used in the middle of the cord. This was a mere matter of employing one well-known form of contacts rather than the other.

But, on referring to the prior patents, it wiE be seen that one of the terminal contacts runs from the switch and terminates in a round plate forming the bottom contact for a lamp. The other lamp contact is the well-known screw sheE, which is also in the circuit being connected with one of the binding posts by the metallic strip. The right-hand binding post, the integral metallic strip running therefrom, and the screw shell contact are in effect a through conductor, likewise carrying currents, just as does the through conductor of the feed-through type. The other conductor is cut at the switch, so that the latter may control the current passing therefrom. We think that no problem remained to be solved after Klein’s invention disclosed in the first patent in suit, and also in his patents Nos. 1,136,680 and 1,151,800. No patent can rightfully issue for an invention aetuaEy covered by a former patent, espeeiaEy to the same patentee, although the terms of the claim may differ. Miller v. Eagle Mfg. Co., 151 U. S. 186, 14 S. Ct. 310, 38 L. Ed. 121.

We think this record discloses that the patentee did not invent the double button snap switch, nor the two-part insulated casing, which are detachably screwed together, and he may not have a grant of invention for the idea of mounting the switch in a two-part easing, so that, upon the removal of one of the parts, both the switch and the wires would he uncovered and revealed, as for repairs or renewals. This idea was found in the prior art. The idea of grooving and recessing the adjacent faces of the half cases, so as to house both the switch and the wires is also old. Nor does the invention rest in putting an old form of switch into an old form of easing, nor mil it amount to invention to change the form or design, as was done in the second patent, so as to make it smaller, different in shape, or more compact, while still using the mechanism of the first patent.

We hold both patents invalid for the reasons above given. Decree reversed in part, and affirmed in part, with costs in both courts.