author: MeDERMOTT, Circuit Judge.

text:
    TUCKER et al. v. TRAYLOR ENGINEERING & MANUFACTURING CO.
    No. 368.
    Circuit Court of Appeals, Tenth Circuit.
    April 6, 1931.
    G. C. Spillers, of Oklahoma City, Okl. (Chas. L. Yancey and Henry L. Fist, both, of Tulsa, Okl., on the brief), for appellants.
    A. J. Biddison, of Tulsa, Okl. (Harry Campbell, Valjean Biddison, and John H. Cantrell, all of Tulsa, Okl., on the brief), for appellee.
    Before COTTERAL, PHILLIPS, and MeDERMOTT, Circuit Judges.
   MeDERMOTT, Circuit Judge.

On July 15, 1919, the appellee (defendant below) delivered to the Choctaw Portland Cement Company its written proposal to sell “One 42"x48" Traylor Bulldog Self-aligning Jaw Crusher,” delivery f. o. b. factory. The proposal provided:

“The company will repair f. o. b. works where made, or furnish without charge f. o. b. its works, a similar part to replace any material of its own make which within one year after shipment is proven to have been defective when shipped, provided the purchaser gives the company immediate written notice of such defect; but the company shall not be liable for any delay or damages caused by such defective material, and no allowance will be made for repairs or alterations unless made upon the written consent or approval of the company.
“It is expressly understood and agreed that no officer or agent or salesman has any authority to obligate the company by any terms, stipulations or conditions not herein expressed; that all previous representation and agreements, either verbal or written, referring to the machinery and equipment which is the subject of this contract, are hereby superseded and cancelled; and that there are no promises, agreements or understandings outside of this contract.”

Attached to the proposal were detailed specifications.

The cement company did not promptly accept; the defendant wrote several followup letters urging acceptance; on November 14, 1919, the cement company wrote and inquired how long defendant would need in which to make shipment, to which defendant replied. On December 23, 1919, the cement company wrote defendant to “please enter our order as given below for immediate shipment to Hartshome, Okla., 1 42x48 Bull Dog Jaw Crusher.” Neither this order, nor its cover letter, stated any price or specifications. The defendant in writing acknowledged the .order and manufactured the crusher. It was shipped out in the early spring of 1920, and was examined while still on the cars. It was painted, and no defect was observed. It was then hauled a short way from the cars and left standing on a hillside, exposed to the weather, and is there yet. The buyer never attempted to use it; the cement company went into bankruptcy in February, 1921, and on January 15, 1929, nine years after delivery of the crusher, this action was brought in the state court by E. T. Tucker, who purchased this claim from the trustee in bankruptcy. '

The cause was removed to the federal court and'an amended petition filed, the trustee in bankruptcy joining as plaintiff. That petition alleges a contract of purchase, and that “no specific written contract was entered into in regard to the purchase and sale of said rock crusher, grizzley and elevator, but that certain letters and memoranda were written concerning the same, all of which are in the care, custody and control of the defendant, and for that reason plaintiff herein is unable to attach copies of such written memoranda as were made concerning the said transaction.” It then alleges that one of the steel beams supporting the journal was cracked, and had been painted over so as to conceal the crack. There are three counts in the amended petition: (1) For breach of the implied warranty of fitness to do the work for which it was designed, for which judgment for $17,000, the full value of the crusher is prayed; (2) for entire failure of consideration, for which judgment is prayed for $14,500, the amount paid for the crusher; and (3) for fraud, in that defendant, having discovered the eraek before shipment of the crusher, willfully concealed the same by paint for the purpose of defrauding, cheating, swindling, and wronging the buyer, for which alleged-wrong $17,000 is prayed.

The evidence disclosed that the eraek was not discovered until about 1923. No written complaint was made to the defendant about it for six more years, or until this suit was filed. The crack contained grouting or moulding sand, and the beam would have broken if the crusher had been used for large rocks. The crack could have been repaired for a nominal sum, or a new beam furnished. There is no evidence that, if the defective part had been repaired or replaced, the crusher would not have performed the work for which it was purchased. While the plaintiffs’ evidence is unsatisfactory, and the defendant’s evidence clear and direct, there was evidence from which a jury might have found that the eraek existed when the crusher left the factory. At the close of all the evidence, the trial court directed a verdict for the defendant, on the ground that the contract measured the rights of the parties as to defective parts, and that there was no evidence of-fraud.

The plaintiffs complain that the written proposal, the order of the cement company for the crusher, and the other correspondence, were improperly admitted in evidence. It is claimed that none of these documents was properly identified. It was necessary to use copies, and in some instances copies of copies; but the absence of the originals or the original copies was satisfactorily explained; the correspondence bears internal evidence of its genuineness; it is a connected chain, and we have not the slightest doubt of its integrity. But in addition to that, much of it is immaterial. That the cement company bought this crusher is the basis of plaintiffs’ claims; that its purchase was accomplished through the order of December 23 admits of no doubt; the order of December 23 carried no price, and obviously refers back to some prior negotiations, or it is meaningless. The only document or bit of evidence produced that can supply the price necessary to make sense out of the December 23 letter is the proposal of July, 1919. A carbon copy of that proposal was positively identified by the individual who handed it to the cement company; the plaintiffs allege that they do not have the original. The proposal of July, 1919, was properly admitted, and it is the proposal accepted by the cement company in December.

The first count is based upon the breach of an implied warranty of fitness. The doctrine is not applicable here for the reason that the only thing complained of is a defective part, and the parties have contracted as to their respective rights and obligations in case of such defective part. There is divergence of opinion as to whether the presence of an express warranty necessarily excludes the existence of an implied warranty of a different character, and which supplements, but does not contradict, the express warranty. Dewitt v. Berry, 134 U. S. 306, 10 S. Ct. 536, 33 L. Ed. 896; Loxtercamp v. Lininger Imp. Co., 147 Iowa 29, 125 N. W. 830, note 33 L. R. A. (N. S.) 501, on the topic “Does express warranty as to quality exclude implied warranty as to quality?”

It is clear, however, both upon principle and authority, that the doctrine of an implied warranty cannot be invoked to render nugatory a provision of a contract. Willis-ton, in his work on Contracts, § 993, says: “In some eases it has been held that an express warranty in a contract to sell or sale necessarily excludes any implied warranty. If express warranties in a contract are in their nature inconsistent with the warranties which would have been implied had none been expressed, it would indeed be violating the intention of the parties to imply warranties, but the principle should extend no further.”

Judge Walter H. Sanborn states the rule as follows: “An express warranty of one of the qualities of an article excludes an implied warranty of other qualities of a similar nature. The exaction or acceptance by the purchaser of personal property of a warranty of one quality raises a conclusive presumption that he did not desire; or could not secure, or the parties agreed that he should not have, the warranty of others of the same character. Benjamin on Sales (7th Am. Ed.) 672; Carleton v. Lombard, Ayres & Co., 72 Hun, 254, 260, 25 N. Y. S. 570; Jackson v. Langston, 61 Ga. 392; Baldwin v. Van Deusen, 37 N. Y. 487, 489; Deming v. Foster, .42 N. H. 165, 175; Dewitt v. Berry, 134 U. S. 306, 313, 10 S. Ct. 536, 33 L. Ed. 896; Seitz v. Brewers’, etc., Machine Co., 141 U. S. 510, 517, 12 S. Ct. 46,- 35 L. Ed. 837; Buck-staff v. Russell & Co., 79 F. 611, 615, 25 C. C. A. 129, 133; International Pavement Co. v. Smith, etc., Machine Co., 17 Mo. App. 264, 269; Chandler v. Thompson (C. C.) 30 F. 38, 46; J. I. Case Plow Works v. Niles & Scott Co., 90 Wis. 590, 604, 63 N. W. 1013; McGraw v. Fletcher, 35 Mich. 104,106; Mullain v. Thomas, 43 Conn. 252, 254. There was no implied warranty of the fitness of the pump to do the work for which pumps of its nature are designed, and there was no breach of the express warranty contained in the contract.” Reynolds v. General Electric Co. (C. C. A. 8) 141 F. 551, 556.

The Uniform Sales Act expresses the rule as follows: “An express warranty or condition does not negative a warranty or condition implied under this act unless inconsistent therewith.” Section 15 (6).

The sole complaint of plaintiffs in this case is that a part of the crusher was defective when shipped. By their written contract the parties have agreed that in event of such defect the obligation of the defendant is limited to repairs or replacement of the defective part for a period of one year. That is the agreement the parties made to cover the precise contingency which has occurred, and there is no power in the courts to change it. Stone, Sand & Gravel Co. v. United States, 234 U. S. 270, 34 S. Ct. 865, 58 L. Ed. 1308; Kansas Union Life Ins. Co. v. Burman (C. C. A. 8) 141 F. 835, 849; Morris & Co. v. Power Mfg. Co. (C. C. A. 6) 17 F.(2d) 689; Framerican Industrial Development Corp. v. Specht (D. C.) 297 F. 858, affirmed (C. C. A. 3) 297 F. 862; F'oxley v. Rich, 35 Utah, 162, 99 P. 666; Moline Plow Co. v. Wilson, 74 Okl. 89, 176 P. 970; Moline Plow Co. v. Hooven, 76 Okl. 250, 185 P. 102.

This reason being ample, there is no occasion to discuss the questions of whether the sale was one of a definite described article under its trade-name, Braden v. Mountain Iron & Supply Co. (C. C. A. 8) 32 F.(2d) 244, or whether such warranty is breached by a defective part in a machine otherwise suitable for the purpose intended.

Not having given written notice of this defective part until six years after the discovery of the defect, and the defendant’s obligation as to defective parts being limited to one year, the plaintiffs cannot recover on the first count.

For the same reasons, there can be nd recovery on the second count. There are additional reasons. The second count alleges that the crusher was worthless; that there was therefore an entire failure of consideration; the relief prayed for is the return of the money paid. But there is no evidence that the machine was worthless. The evidence developed that there was a defective part which must be repaired or replaced before the crusher would successfully operate. But that does not prove that the crusher was worthless; 'an automobile cannot be operated successfully with a defective fan belt; but proof of a defective fan belt does not prove that the automobile'is worthless; nor does it prove that the automobile is not fit for the purposes for which it was designed. Furthermore, the plaintiff did not tender back the crusher; on the contrary, it was sold by the trustee in bankruptcy. A buyer loses his right to rescind and recover the price paid by continuing to treat the property as his ■own. Shappirio v. Goldberg, 192 U. S. 232, 24 S. Ct. 259, 48 L. Ed. 419; McLean v. Clapp, 141 U. S. 429,12 S. Ct. 29, 35 L. Ed. 804; Eunglig Jarnvagsstyrelsen v. Bank (C. C. A. 2) 20 F.(2d) 307; Watehorn v. Roxana Petroleum Corp. (C. C. A. 8) 5 F.(2d) 636.

The third'eount sounds in tort. The ■plaintiffs not only alleged, as in the other •counts, that the part was defective when shipped, but further alleged that defendant 'knew it was defective, and deliberately con•eealed the defect with paint with the intent •of defrauding, cheating and swindling the plaintiffs. If there is evidence to sustain such •serious charges, the contract is no defense. But the record is barren of any proof thereof. There is not even room for a suspicion that such was the fact. The suggestion is an -utterly improbable one. The defect was such that it would be discovered as soon as the •crusher was used; the defendant had contracted to repair or replace defective parts within a year; no sane person would deliber.ately ship out a defective part which would have to be promptly repaired or replaced. .But a finding of fraud cannot be bottomed on even plausible suspicion. Fraud is never presumed; it must be established by clear, satisfactory, and convincing evidence. Raines v. Ligon (C. C. A. 10) 37 F.(2d) 633, and eases there cited. If the circumstances are as consistent with honesty as with dishonesty, the inference of honesty must be drawn United States v. Mammoth Oil Co. (C. C. A. 8) 14 F.(2d) 705, decree affirmed, 275 U. S. 13, 48 S. Ct. 1, 72 L. Ed. 137. The plaintiffs rely upon meager circumstances to arrive at the inference that the part was defective when the crusher was shipped; it is not permissible to build upon that inference the further inference that defendant knew of the defect. United States v. Mammoth Oil Co., supra; Looney v. Metropolitan Railroad Co., 200 U. S..480, 488, 26 S. Ct. 303, 50 L. Ed. 564. The third count fails for laek of proof.

The judgment is affirmed.


source: Caselaw Access Project

author: PARKER, Circuit Judge.

license: Public Domain

text:
    DAUGHTRY et al. v. MARYLAND CASUALTY CO.
    No. 3112.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.

      E. A. Bilisoly, of Norfolk, Va. (Tazewell Taylor, Jr., Roland Thorp, and Jas. G. Martin, all of Norfolk, Va., on the brief), for appellants.
    J. W. Eggleston, of Norfolk, Va. (Vandeventer, Eggleston & Black, of Norfolk, Va., and Richard Pausch, of Baltimore, Md., on the brief), for appellee.
    Before PARKER, Circuit Judge, and WEBB and GLENN, District Judges.
   PARKER, Circuit Judge.

This was a suit by materialmen under a contractors’ bond. Prom an adverse decree of the court below they have appealed. The sole question presented by the appeal is whether the claims of materialmen are protected by the bond sued on. The facts are as follows:

Hudson & Scruggs, contractors, entered into a contract with the city of South Norfolk, Va., to do certain paving. The contract provided that they should furnish all the materials necessary for that purpose “at their own proper cost and expense.”' It contained a provision also that the city council might at any time require of them “full release of all claims for materials or labor furnished” for the work and might withhold payment of any estimate until evidence of such release should be produced. Article 12 of the contract, which is the one of particular importance here, was as follows:

“The contractor further agrees, that they will, and concurrent with this contract, does execute a bond in the sum of $75,000.00, in such form and with such sureties as may be approved by the Council of the City of South Norfolk, Virginia, conditioned to indemnify and save harmless the said City of South Norfolk, from all suits, actions, proceedings of every name and description in law or equity brought against said City of South Norfolk, or both, or any officer or officers, agent or servant thereof, for or on account of any injuries or any damages that may be sustained by any person, structure or property, by or from said contractor, his servants or agents, in the prosecution of the work, or from infringement of any patent; or due to, or in consequence of, any negligence or any act or omission of said contractor, their servants or agents and guaranteeing the faithful performance of this contract and the payment of the laborers’ wages, bills for materials, and all expenses incurred by the contractor.” (Italics ours).

Pursuant to this provision of the contract, a bond was given which recited the execution of the contract and the fact that same was thereto attached. The condition of this bond was as follows :

“The conditions of the above obligation are such that if the said bounden Hudson & Scruggs, Inc., or their successors or assigns, shall well and truly, and in a good, sufficient and workmanlike manner, perform the work mentioned in the aforesaid agreement, in accordance with the terms and provisions therein stipulated, to the satisfaction of the Engineer and the approval of the Mayor and Council and each and every respect comply with the conditions and the covenants in the aforesaid agreement contained, and shall indemnify a/nd save harmless the City of South Norfolk, Virginia, against and from dll suits and actions of every name and description arising out of any claims connected with the work agreed to be performed under the contract, or of any material or materials used upon the said work, then this obligation to be void; otherwise to remain in full force and virtue.” (Italics ours.)

It is the contention of the bonding company that this bond protects only the city; and that, so far as claims for labor and materials are concerned, its only effect is to protect the city against suits and actions for claims thereon. It may be remarked in passing that, if this interpretation be correct, the provision as to claims for labor and materials might well have been omitted; for, as no suit or action thereon is maintainable against the city, there was no occasion to protect the city against same. Complainants, on the other hand, contend that the contract and bond must he construed together, and that, when so construed, the purpose and intention of the parties in executing them to protect the claims of laborers and materialmen plainly appears.

It is well settled that where neither the contract nor the bond provides for the payment of labor and material claims, these are not protected, even though there be a statute requiring their protection. And this is true although the contractor is required to furnish the labor and materials at his own cost and expense. U. S., to use of Stallings, v. Starr (C. C. A. 4th) 20 F.(2d) 803, and eases there cited. On the other hand, it is equally well settled that the contract and bond must be construed together, and that, when so construed, if the payment of claims for labor and materials is provided for, same will be held to be within the guaranty of the bond. Maryland Casualty Co. v. Fowler (C. C. A. 4th) 31 F.(2d) 881, 882, 63 A. L. B. 1375; Hartford Accident & Indemnity Co. v. Board of Education (C. C. A. 4th) 15 F.(2d) 317. As said by Chief Justice Stacy in Ideal Brick Co. v. Gentry, 191 N. C. 636,132 S. E. 800, quoted with approval by us in the Fowler Case:

“The principle is well established by many authoritative decisions, here and elsewhere, that in determining the surety’s liability to third persons on a bond given for their benefit and to. secure the faithful performance of a building contract as it relates to them, the contract and bond are to be construed together. Mfg. Co. v. Andrews, 81 S. E. 418, 165 N. C. 285, Ann. Cas. 1916A, 763. In application of this principle, recoveries on the part .of such third persons, usually laborers and materialmen, though not expressly named therein, are generally sustained where it appears, by express stipulation, that the contractor has agreed to pay the clailns of such third persons, or where by fair and reasonable intendment their rights and interests were being provided for and were in the contemplation of the parties at the time of the execution of the bond. [Citing, eases]. The obligation of the bond is to be read in the light of the contract it is given to secure, and ordinarily the extent of the engagement entered into by the surety is to be measured by the terms of the principal’s agreement.”

In the ease at bar, the contract provided that the bond to be given should guarantee, not only the faithful performance of the contract, but also the payment of the bills for labor and materials. This was not left to future action, but the bond was executed concurrently with the execution of the contract and the latter so states, the language being that the “contractor * * * will, and concurrent with this contract does execute a bond * * * guaranteeing * * * the payment of the laborers’ wages, bills for materials, and all expenses incurred by the contractor.” While it is true, as argued, that the contract was signed by the contractor and not by the surety, it is true also that the contract containing the provision quoted was attached to and made a part of the bond which the surety did sign. In other words, the surety says in the bond, “I am guaranteeing the performance of the contract hereto attached.” The attached contract says, “The contractor will give bond' guaranteeing the payment of labor and materials and gives it .concurrently herewith.” Both the surety and the contractor, therefore, gave the bond to the city with the statement in writing attached thereto that same was to he given, and was given, to guarantee payment for labor and materials.

After delivering the bond under the foregoing circumstances, the surety ought not be heard to assert that it does not contain the guaranty which the attached contract stipulated that it should contain. But it is not necessary to resort to1 the principles of estoppel. The fair and reasonable construction of the provisions of the bond and the contract, when considered together, is that the payment of laborers and materialmen was being provided for and guaranteed. To hold otherwise would deny all force and effect to the provision of the contract (incorporated in the bond by reference and attachment), that the latter should guarantee the payment for labor 'and materials, would convict the officials of the city of carelessly letting a contract without requiring the security for laborers and materialmen almost universally required in the case of public works not subject to liens, and would place the surety in the unenviable position of inserting in the bond a provision as to labor and materials which was practically meaningless and in the absurd position of executing a bond which did not comply with the terms of a contract and, at the same time, attaching to it the contract containing the statement that the bond was being given pursuant to its terms.

What happened is perfectly clear. The city, not being subject to suit by laborers and materialmen and its property not being subject to liens in their behalf, provided in its contract for their protection by bond, as is generally required in the ease of public works of this character. In giving the bond, the form generally used for the protection -of private owners whose property is subject to laborers and materialmen’s liens was adopted. This mistake might have been a serious one and left laborers and material-men absolutely without protection, but for the fact that the contract and the bond referred. to each other, were executed at the same time, and were delivered to the city practically as one instrument. When they are construed together, we think that there can be no question that it was intended by all parties, including the surety, that the bond should guarantee the claims of laborers and materialmen, although the language of the bond, if taken alone, would not be broad enough to cover them.

It is but fair to the learned judge below to say that he felt, as a matter of first impression, that claimants were protected under the bond in question, but felt constrained to hold otherwise because of the interpretation placed by him upon our decision in the case of U. S., to Use of Stallings, v. Starr, supra, 20 F.(2d) 803. We think, however, that he pressed the doctrine of that ease too far. We held there that laborers and materialmen were not protected where the payment of their claims was not provided for either in the bond or in the contract which it secured; and we held that this was true even though the contract required that such bond be given and contained a provision that the work be done at the cost and expense of the contractor. In that ease, however, the contract in question required in paragraph one thereof that a surety bond be given for the performance of the contract without ref-' crenee to claims for labor and materials. In paragraph 17, it required merely that the contractors procure and keep in force all such bond or bonds for the protection of the claims of laborers and materialmen as might be required by the laws of the United States. The contractor gave the bond required by the first paragraph, but did not give that required by the seventeenth; and there was no ground for interpreting the bond as given as being intended by the parties to comply with both requirements. Here only one bond was required; but the requirement was that it protect laborers and materialmen as well as the city. The bond sued on was delivered, as we have seen, both by the contractor and by the surety, as a compliance with this requirement; and a copy of the contract was attached reciting that it was so delivered. By no fair and reasonable construction of the bond and contract in the Starr Case could it be said that the parties intended that the bond there in question should protect laborers and materialmen. Here, we think, no other interpretation is reasonably possible.

The decree below will accordingly be reversed, and the cause will be remanded for further proceedings not inconsistent with this opinion.

Reversed.


author: GARDNER, Circuit Judge.

text:
    UNITED STATES v. LE DUC.
    No. 8989.
    Circuit Court of Appeals, Eighth Circuit.
    March 19, 1931.

      Joseph W. Finley, Asst. U. S. Atty., of St. Paul, Minn. (Lewis L. Drill, U. S. Atty., of St. Paul, Minn., J. H. Praine, Regional Atty., U. S. Veterans’ Bureau, of Minneapolis, Minn., and H. R. Pool, Atty. U. S. Veterans’ Bureau, of Hines, Ill., on the brief), for the United States.
    L. B. Schwartz, of Minneapolis, Minn. (Schwartz & Halpern, of Minneapolis, Minn., on the brief), for appellee.
    Before STONE and GARDNER, Circuit Judges, and WOODROUGH, District Judge.
   GARDNER, Circuit Judge.

This is an appeal by the United States from a judgment against it on a policy of war risk insurance. The parties will be referred to as they appeared in the lower court. Roy Le Due, while in active military service during the World War, was granted war risk term insurance in the amount of $10,000, payable in the event of death or permanent and total disability occurring while the contract was in force, in monthly installments of $57.50 each. The plaintiff, Frank O. Le Due, was designated as the beneficiary. Premiums were paid on the policy to and including May, 1919. At that time default in the payment of premiums occurred, and, by the terms of the contract, no benefits were payable unless the insured had become permanently and totally disabled prior to midnight July 1, 1919. Plaintiff alleged that the insured became permanently and totally disabled on July 8, 1918, and died therefrom December 23, 1926'. The government, in its answer, admitted the issuance of the contract of insurance, the death of the insured, and in effect denied the other allegations of the complaint. The question contested . in the lower court was whether the insured, on or prior to July 1, 1919, had become permanently and totally disabled.

At the close of all the testimony the government moved for a directed verdict in its favor, on the ground that there was no evidence to show that the insured was totally disabled at a period while his insurance contract was in force, nor to show that there was any reasonable assurance at that time that a condition of disability would continue throughout his life. This motion was denied, and the defendant excepted. The denial of the government’s motion for a directed verdict is the controlling question presented on this appeal. The burden of proof to establish permanent and total disability while the insurance contract was in effect was upon the plaintiff. Claiming to act by virtue of authority conferred by section 13 of the War Risk Insurance Act, as added by Act Oct. 6, 1917, 40 Stat. 399, the Treasury Department issued Treasury Decision No. 20 W. R., defining the term “permanent and total disability” as follows: “Any impairment of mind or body which renders it impossible for the disabled person to follow continuously any substantially gainful occupation shall be deemed, in Articles III and IV, to be total ■disability. ‘Total disability’ shall be deemed ix> be ‘permanent’ whenever it is founded upon ■conditions which render it reasonably certain that it will continue throughout the life of ■the person suffering from it.”

Whether this pronouncement by the Treasury Department was authorized by congressional enactment and hence has the force and ■effect of law, we need not determine, because this court had adopted substantially the same Tule as to total disability. In United States v. Phillips (C. C. A.) 44 F.(2d) 689, 691, ■in an opinion by Judge Kenyon, it is said: “The term ‘total and permanent disability’ does not mean that the paxfy must be unable to do anything whatever; must either lie ■abed or sit in a chair and be cared for by ■others. The test laid down in the eases is well stated in United States v. Sligh (C. C. A.) 31 F.(2d) 735, 736, as follows: ‘The term “total and permanent disability” obviously does not mean that there must be proof of absolute incapacity to do any work at all. It is enough if there is such impairment of capacity as to render it impossible for the disabled person to follow continuously any substantially gainful occupation.’ ” See, also, Blair v. United States (C. C. A.) 47 F.(2d) 109, 111.

Our inquiry is, therefore, directed to the question: Was the insured in the instant case, •during the life of his policy, so impaired in health as to permanently disable him from following continuously any substantially gainful occupation?

It appears from the undisputed evidence that the insured was about nineteen years old when he was discharged from the Army in May, 1919. He returned to his home and remained there unemployed for about a month. He worked for three weeks in June, 1919, for Butler Bros, in Minneapolis, Minn. He worked steadily from July 8, 1919, to September 29,1919, for the Minneapolis Steel ■& Machinery Company in Minneapolis as a sheet metal worker-, riveter assembler and helper, quitting with the excuse that he was leaving town. He worked for six weeks in the fall of 1919 as a farm laborer in South Dakota. On December 29, 1919, he re■enlisted in the regular Army, and deserted August 29, 1920. In September, 1920, he worked for two or three weeks for the Steel Type Piston Ring Company of Minneapolis, ■and at a number of odd jobs during the fall of 1920. On January 27, 1921, he again re■enlisted in the Army under the name of Roy Moore, and again deserted August 31, 1922. He was then convicted of the larceny of an ■automobile and served a term of imprisonment in the reformatory at St. Cloud, Minn., from July 22,1922, to July 7,1925, when he was paroled. During his imprisonment; he worked at manual labor in the stone quarry and stone shop from July 22, 1922, to July 20,1923, and from March 4,1924, to September 8, 1924. During the balance of the time covered by his sentence in the reformatory, he worked in the music department, the kitchen, and tailor shop, and attended school. Thereafter, from July 7, 1925, to January 23,1926, he worked for the Minneapolis City Water Works as a laborer, digging ditches and putting in water pipes, at a daily wage of $5, and was laid off because the work was completed. Shortly afterwards, he was hospitalized, and died September 23, 1926, and the doctor who made an autopsy concluded that the pulmonary tuberculosis from which death resulted, had been relatively acute and rapid in its progress, continuing probably not over one year.

From the time of the insured’s discharge in May, 1919, to the date of his death in 1926, his physical condition is fairly reflected as a matter of record. At the time of his discharge, the records indicate that he had no physical disability and no physical defects of any kind, other than a sear of appendectomy, which existed prior to enlistment. At the time of his second enlistment in December, 1919, he had a medical examination which indicated that he had several missing teeth and a sear of appendectomy. He remained in the service for some eight months with no hospitalization record, except that from January 18 to January 29, 1929, he was treated for influenza and from May 8, 1920, to July 13, 1920, he was treated for gonorrheal infection. On January 27, 1921, having previously deserted, he again enlisted and passed another medical examination. On his entrance to the reformatory on July 24, 1922, he passed a medical examination, and was examined repeatedly thereafter during his incarceration, and the doctor states that, “His physical condition at that time was very-good, and from the findings I made at that time, I would say his condition was normal and his health normal.” Throughout the entire period from the time of his discharge until shortly before his last illness, he was gainfully employed, and never unemployed at other times, so far as disclosed, except that the functional adviser at the reformatory says that he was in the hospital several times during his incarceration, saying, “I don’t know how long or what for.”

Against this record, members of the insured’s family, including the plaintiff, testitied that after the insured returned from service in May, 1919, his cheeks were sunken in, he had dark rings under his eyes, and had turned to sort of a copper color; he was short-winded, and on running half a block, he was puffing as if it had been a mile, and after running half a block he leaned up against a street ear and began to cough for a minute or so; his face was flushed and red, and he began to sweat; that whenever he did anything like running, he did not seem able to> stand the strain; he complained of pain and was not is bright and peppy as he was before he ,vent away; he coughed a good deal at night, his appetite was not good, he appeared to he bothered with stomaeh trouble, and he was very much run down and his vitality seemed low; he always complained of his stomaeh and never got rid of the cough; he had periods of constipation and diarrhea. Other members of the family testified to substantially the same effect, but on cross-examination n appeared, as it did from other testimony, that the insured was absent from home the greater part of the time, and that the witnesses had no personal knowledge of his health or physical condition during such periods of absence, particularly during his two enlistments in the Army and his term in the reformatory.

There was no proof that the insured had active tuberculosis contracted between July 19, 1918, and May 24, 1919. Plaintiff produced an expert who testified that he had examined certain X-ray films made of Roy Le Due in January, 1926, at the United States Veterans’ Bureau Hospital. This witness had never seen the insured, nor made any examination of him, but his testimony was based solely upon an examination of the X-ray pictures and upon certain assumed facts. Over objections that proper foundation had not been laid and that his testimony was immaterial and too remote, the witness was permitted to testify to certain conclusions based upon the X-ray pictures, to the effect that the pictures reflected an advanced tuberculosis, involving both lungs in their upper portions; that there was a large cavity in one lung, and an extensive fibrous scar formation in both lungs. The witness was then interrogated as follows: “Q. Can you upon an examination of the films, showing the condition of the lungs, determine with reasonable certainty as to the approximate time of the origin of such-a disease as tuberculosis? A. We can within broad limits, that is, we can state something as to the minimum length of time that the disease was present, and much more roughly something as to the maximum length of time that the disease was present in some eases; not in all cases, but in many eases.”

The witness further testified: “It is much more difficult to arrive at the approximate estimate as to the. maximum length of time it was present, but it is not so difficult to arrive to a rough idea as to the minimum length of time.”

The witness then stated that, from an examination of these X-ray pictures, he was-of the opinion that the minimum time that Roy Le Due had been suffering from active tuberculosis “would have been approximately two years.” In answer to an interrogatory as to the maximum length of time, the witness stated: “That might also have been two years and it might have been ten years. You cannot say definitely. It might have been ten, or fifteen years — as I said before, the limits are much broader.”

The witness'then stated that in'his opinion,, the insured was suffering from active tuberculosis prior to January 1, 1925. He was then asked the following hypothetical question : “How, assuming, that this hoy had active tuberculosis between — -or contracted it between July, 1918, and the 24th of May, 1919, and assuming that he was suffering from active tuberculosis originating back there in 1918, or between those two dates, Doctor, and taking into consideration the advanced state of the development of that disease, in the form that it existed in January, 1926, and taking into consideration and assuming also that this boy died as the result of active tuberculosis, several months after January, 1926, or I think it was the 29th or the 23rd of September, 1926, can you form an opinion as to whether or not at any time prior to, let us say, the 31st, or at any time prior to the 1st of July, 1919, whether or not he was so suffering with active tuberculosis, Doctor,, can you form an opinion whether or not this boy was suffering from such an impairment of body or mind, which rendered it impossible for him to follow continuously any substantially gainful occupation, without risking his life?”

The witness, answering in the affirmative, stated his opinion as follows: “Well, I will state again, that with the presence of active' tuberculosis there is always disability, and if he had active tuberculosis in 1919, he was-injuring his life if he continued to work.”

Now, it is observed first that there was-no proof that the insured had active tuberculosis contracted between July, 1918, and. May 24, 1919, or prior to July 1, 1919-, and. it is further noted that the question asked the witness to testify to a fact which in substance the question assumed; in other words, the question answered itself. Dr. McDonald testified that he had examined the insured in December, 1925, and that at that time he had tuberculosis in an advanced stage, and that he did not think his lungs could have become as they were when he made the- examination within a year, and henee was of the opinion that the insured was afflicted with active tuberculosis prior to January 1, 1925. This, with the testimony of Dr. R-igler, already referred to, based upon an examination of X-ray films in January, 1926, was the only medical testimony produced on behalf of the plaintiff. Doubtless what counsel had in mind was to show by medical testimony that the insured was suffering from active tuberculosis prior to January 1, 1925, hoping to invoke the presumption created by section 471, title 38, USCA, which ' provides, among other things, that an ex-service man. who is shown to have had, prior to .January 1, 1925, an active tuberculosis disease developing a 10 percentum degree of disability or more, in accordance with the provisions of subdivision 4 of section 202 of the act (38 USCA § 474), should be presumed to have acquired his disability in such service between April 6, 1917, and July 2, 1921, such presumption being conclusive in eases of aetive tuberculosis. Although a matter of considerable doubt in our minds, this provision of the statute has been held to apply to insurance cases as well as compensation cases. United States v. Elias-son (C. C. A.) 20 F. (2d) 821; Brandaw v. United States (C. C. A.) 35 F.(2d) 181; Runkle v. United States (C. C. A.) 42 F.(2d) 804.

The presumption invoked, assuming it to be applicable, goes to the source and time of acquiring the disability, and not to the degree, -extent, or permanency of the disability acquired. If, therefore, full effect be given the presumption, it cannot be said that it has the effect of supplying proof of permanent and total disability during the life of the policy. Starting then with a presumption that the insured acquired his disability while in service in the Army and while his policy was still in force and effect, we are confronted with certain undisputed facts which occurred subsequent to the time of his discharge. He was twice re-enlisted in the United States Army, passing the medical examinations re•quired, and the statute provides that only able-bodied men shall be permitted to enlist. This proof conclusively precludes the plaintiff from contending that the disability aequired while in the service was permanent. It had certainly been arrested at the time of these re-enlistments.

Ordinarily, a presumption cannot be weighed in the balance against facts, and there is no medical testimony showing that any physician ever found the insured suffering with tuberculosis until December, 1925. Granting that the presumption was properly invoked, it would not, as already pointed out, sustain the contention that the insured became totally and permanently disabled while the insurance contract was in force. Generally speaking, tuberculosis is a progressive disease, totally disabling only when it reaches certain advanced stages. In its ineipiency, disability may not be present at all. The statute furnishes no presumption as to the degree of disability, either in service or at any subsequent time. Even the testimony of Di\ McDonald furnishes no support for the contention that the insured was permanently and totally disabled within the meaning of that term while his contract of insurance was in force, and the record conclusively shows that the insured was not totally and permanently disabled before July 1, 1919. His work record and his medical record refute any such possible contention. The medical testimony shows that he was free from tuberculosis on May 24, 1919-, at the time of his first discharge from the Army; that he was still free from the disease when he re-enlisted in the Army on December 29, 1919, successfully passing the medical examination. He was still free from this disease on January 27, 1921, when he again re-enlisted and passed the medical examination. He was free from the disease when he entered the reformatory in 1922 and passed the medical examination, and during all the years until 1925 he was, not only not permanently disabled, but "was continuously following a substantially gainful occupation.

After all, the right of recovery in these war risk insurance cases is dependent on contract, and it is not within the province of the jury to award from the public funds gratuities to relatives of deceased ex-soldiers; neither can we, under the guise of liberal construction, close our eyes to the undisputed facts disclosed by the record in this case and sustain this verdict on the theory of a constructive, permanent, total disability, which finds support only in a series of superimposed retroactive presumptions. As said by this court in Blair v. United States, supra: “For a court to find under this evidence that prior to March 31, 1919, appellant' was totally and permanently disabled would be a mere guess, unsupported by any substantial evidence.”

There is, in, our opinion, no substantial testimony sustaining this verdiet. At most, it is based upon untenable theories, speculation, guess, conjecture, and surmise.

The judgment is therefor© reversed, and the cause remanded, with directions to grant the defendant a new trial.


author: DENISON, Circuit Judge.

text:
    HARKINS et al. v. JOHNSON.
    No. 5654.
    Circuit Court of Appeals, Sixth Circuit.
    April 8, 1931.
    W. S. Harkins, Jr., of Prestonsburg, Ky. (Joseph D. Harkins, of Prestonsburg, Ky., on the brief), for appellants.
    B. M. James, of Prestonsburg, Ky. (James & Hobson, of Prestonsburg, Ky., on the brief), for appellee.
    Before DENISON, MOORMAN, and BUCKS, Circuit Judges.
   DENISON, Circuit Judge.

John P. Morse, owning an undivided half interest in the coal, oil, and minerals in the lands in controversy, made a conveyance thereof to his wife, his attorney, and two of his sons, as four trustees, for the use and benefit of his wife, his three sons (including’the-two trustees), and one daughter, Mrs. Johnson (appellee herein), share and share alike. The trust is stated as follows:

“To manage, invest, re-invest, sell, mortgage, redeem and otherwise control, to pay debts now owing by me, both secured and unsecured, from time to time as they or their successors may deem it wise and proper to-do, with- full power to sell and convey such portions of said property, real and personal,, as may seem proper, and re-invest the proceeds as a part of said trust unless a majority of my said five beneficiaries shall vote to have said proceeds divided equally and thereby removed from said trust. The net income shall be paid semi-annually in five equal shares as aforesaid during the lifetime of said heneficiaries.”

This was in May, 1912. Later, John P. Morse- died, leaving surviving, as the sole-persons interested, his widow and his four children, who had been named as the five beneficiaries in the trust deed. In October,. 1920, pursuant to negotiations which had been conducted by one of the sons, and participation or acquiescence in which by Mrs. Johnson is not shown, a deed was prepared conveying this entire half interest to Mrs. Josie D. Harkins, one of the appellants. In-this deed, the persons named as parties of the first part were the widow, the four children, with their respective spouses, and “Alice M. Morse [widow], trustee, J. Russell Morse [son] trustee, and Harold G. Morse [son] trustee.” [The fourth trustee, the attorney, had died.] The language of transfer was “sell, alien, release, confirm and convey * * * all their right, title and interest in and to,” etc. The deed further specified that it was the intention of- the parties of the first part to- convey all the right, title, and interest of each of them in and to all the properties which had been theretofore owned jointly by John P. Morse and his co-owner, “being the same properties which descended to the said Alice M. Morse, as surviving widow of John P. Morse, deceased, and to J. Russell Morse, Harold G. Morse, Roland J. Morse and Helena M. Johnson, as children and heirs at law of John P. Morse, deceased; and also the same properties which were conveyed by John P. Morse to Alice M. Morse, et al., trustees by deed” [identified as the above recited trust deed].

Under the direction of counsel for Mrs. Harkins, who had prepared the deed, it was thereupon signed and acknowledged, at separate times and places, by tbe widow and by each of the three sons and his wife; and the widow and the two sons named as trustee also signed in a separate place, adding their title as trustees. Counsel for Mrs. Harkins undertook to get Mrs. Johnson, the remaining child, to sign, but she refused. The total price agreed upon was $9,000. One-fifth of this amount, $1,800, Mrs. Harkins retained, but paid the remainder to the widow and the two sons separately, according to the share of each. Then, having possession of the deed, she recorded it as if it were a completed instrument; but has ever since maintained her offer to pay $1,800 to Mrs. Johnson, upon the latter’s signature to this or an equivalent deed.

Eventually Mrs. Johnson brought this suit in the court below, -to quiet her title to an undivided one-eighth and, in effect, to set aside, as a cloud upon her title, the claim of Mrs. Harkins and her later associates that the deed of October, 1920, by virtue of its joinder by the trustees, operated to cut off Mrs. Johnson’s interest as her father’s heir. The court below granted this relief, reserving for future consideration any accounting for profits received or any partition that might he appropriate.

The outstanding question is the interpretation of the deed of October, 1920. If it were merely a deed from the trustees, it would be sufficient to cub off Mrs. Johnson’s title, unless, as is claimed, the trust had been in the meantime fully executed and either determined or abandoned. There is much to indicate that the trust deed was induced by debts and complications in which Morse was involved; that these had all been cleared away; and that the parties regarded the trust deed as no longer ip effect, but as a form which had served its purpose. We think it unnecessary to decide this question; because the deed of October, 1920, was evidently not merely a trust deed, but something more. Without making here an extended review of the evidence, we conclude, as the District Judge did, that the deed was regarded by the grantee and by all who signed it, as being, in substance, a conveyance by the widow and heirs of John P. Morse, conveying the respective share of each; and that the signatures of the trustees were asked and given by way of release of whatever .title, if any, they might have.

We do not overlook the cases holding that a deed of bargain and sale cannot he shown by parol to be merely a quit-claim or release; but the present deed is in a class by itself. There are two sets of grantors; it is impossible that each set could have undertaken to convey the title, and, necessarily, the title must have come from one set and the release from the other; the deed itself recites that the property descended to the widow and children. Our view of the deed makes it unnecessary to decide whether the grantee, by drafting and presenting a deed in this ambiguous form, by refusing to pay the consideration to the trustees, and by withholding the proportionate amount that was coming to Mrs. Johnson until she should sign, has equitably estopped herself from asserting that, in spite of this, she has acquired Mrs. Johnson’s title.

With this view of the facts and the legal effect which should be given to the deed in question, the decree of -the court below is affirmed.


text:
    KENTUCKY-TENNESSEE LIGHT & POWER CO. v. CITY OF PARIS, TENN. CULLEY v. KENTUCKY-TENNESSEE LIGHT & POWER CO.
    Nos. 5635, 5636.
    Circuit Court of Appeals, Sixth Circuit.
    April 8, 1931.

      William Marshall Bullitt and J. E. Tar-rant, both of Louisville, Ky. (Bruce & Bullitt, of Louisville, Ky., and J. W. Van Dyke, of Paris, Tenn., on the brief), for KentuekyTennessee Light & Power Co.
    R. L. McReynolds, of Clarksville, Tenn., and Y. Q. Caldwell, Jr., of Paris, Tenn., for W. Y. Morris and others.
    Before DENISON, MOORMAN, and HICKS, Circuit Judges.
   DENISON, Circuit Judge.

The city of Paris, Tenn. — hereafter called the city — owned and operated electric light and water plants, with the necessary distribution systems, for supplying itself and its citizens. Its governing body decidéd to sell the combined plant for private operation. Byrd, purporting to act in his own interest, but with the declared intention of making a transfer to an operating company, negotiated and closed a contract which gave him a lease, an operating franchise, and a contract to buy. Later, he made such transfer, and, with the consent of the city, the KentuekyTennessee Light & Power Company — hereafter called the company — was substituted for Byrd and took over the plants and began operations. This was in January, 1926, and it continued operating and performing its obligations under the contract until June 9, 1928. On that date, the city commenced this suit by filing a bill in a state chancery court. The bill claimed that the contract had been obtained through fraud and asked its cancellation. The case was removed to the court below, and heard in open court. The trial judge found the existence of sufficient ground to justify the city in claiming a rescission, and made a decree accordingly; but directed that the city, as a condition of the rescission, should repay to the company various items expended by it in additions, improvements, purchase price installments, and other-matters, of which the city would get the benefit upon rescission. The company appealed, and what was called a cross-appeal was taken by Culley et al., who had assumed to intervene as plaintiffs. The city did not appeal. The company complained, both because a rescission had been ordered and because, if there were to be a rescission, there should have been larger , repayments. The cross-appellants complained because any repayment had been directed.

It is plain that the so-called cross-appeal must be dismissed. The issue joined between the city and the company came on for hearing on the day fixed. On that day, Culley and three- others filed in the court what they called an amended bill, consisting of seven paragraphs to be added to the original bill. It was signed by the solicitors for complainants, and alleged that Culley and three others were citizens, residents, and taxpayers in the eity, “and that, in such capacity, they stand in danger of having their taxes materially increased, and will suffer financial loss unless the relief sought in this bill is obtained, and that they are, for that reason, interested in the matters in this bill alleged and entitled to the relief herein prayed. Therefore, they ask to be made parties complainant to the said bill.” Doubtless the complainant, the eity, should be considered as consenting to this amendment and (in effect) intervention; but the record shows no notice to defendant, nor was any order made by the court. The amendment was an attempt to make new parties complainant, bring in new interests, and perhaps avoid defenses that might be good against complainant. Defendant was entitled to notice before the amendment .could be permitted; but, even with notice, the amendment could not have been allowed. Such a suit by taxpayers, even though not controlled expressly by general equity rule 27 (28 USCA § 723), is by the general principles of equity permitted only when the municipal corporation has refused to act in disaffirmance of the contract of which the taxpayers complain. Here the taxpayers purported merely to be joining in claiming the same rights which the city was already claiming in their behalf, and they were plainly not entitled to sue. City of Princeton v. Princeton Co., 166 Ky. 730, 744, 179 S. W. 1074. The defendant was under no obligation to have them dismissed from the record as parties, because they never had been admitted. They had no status which entitled them to appeal from the decree, and their appeal is dismissed.

It should be noted that this dismissal is, in view of our later conclusions, of little practical importance. The only position taken by cross-appellants in their brief, as filed, is that the contract of lease and sale was so ultra vires as to be void and incapable of ratification, or as not to justify requiring restoration as a condition of rescission; and these questions are necessarily involved in passing upon the appeal of the company.

A question of practice should be noticed. After the cause was at issue, it was by the clerk put upon the trial calendar for the next term, and was called'for trial on the second day. Defendant then requested a postponement, both because its leading counsel was otherwise engaged and because the practice did not permit so summary a setting. So far as the application depended upon the absence of one of the counsel and appealed to the discretion of the court, involving several considerations, we cannot say that the discretion was abused. We are not referred to any general equity rule or to any special equity rule of this district which we think governed the situation. The matter of setting for trial was therefore to be disposed of by the court in any reasonable way; and, since the trial was to be in open court, as in a suit at law, it was natural and reasonable to apply the special law rule, said to have been long recognized in this district, and which directly authorized the course taken. The objection made is that the time provided by general equity rule 47 (28 USCA § 723) for taking depositions had not expired, and so the setting was premature. We think the rule should not be so applied. It applies only to eases where the court has made an order permitting depositions to be taken; 'and here there had been no such order. There are statutes authorizing depositions; but we know of none fixing a minimum time limit therefor.

Coming first to the question of power: We think the power was clear. Whether the construction and operation of municipal water and light plants to furnish water and light to the citizens should be considered as an exercise of the governmental power, or as the doing of business in a proprietary capacity, no one doubts that the General Assembly could, by express words, grant to the municipality the right to sell or convey such a plant. The eity charter is found in a special or private law, which is chapter 528 of the Private Acts of 1921. One of the granted powers is that the eity “may purchase and hold property, real and personal, within and beyond the limits of the City for * * *, the erection and extension of water works, electric lights, parks and for any other corporate purpose and shall have power to sell, convey and do such acts relating to same as natural persons.” Section 4. We pass by all questions as to whether this power supported the contract which was made with the company, because we find that, in 1927, the General Assembly ratified this contract, by chapter 661 of the Private Acts for that year , (volume 2, p. 2105). The act provided “that all sales, leases, rentals or other dispositions of municipally owned water, electric or other utilities, for consideration, heretofore bargained, sold and conveyed, leased or rented by municipalities in the State of Tennessee in counties of a population * *' * not less than 27,151, and not over 27,170 * * * according to the last Federal Census ** * * shall he, and are, hereby validated as legal and binding transactions.”

The city of Paris is in Henry county, and the population of that county, by the census referred to, was 27,151. This particular contract was therefore within the ratification.

It is probably, on its face, clear enough that this ratifying act picked out five particular counties in the state, within each of which was a city which had made such contracts, classifying -and describing these counties by population. Whatever might be thought of the political desirability of identifying cities in this way, such considerations are for the Legislature. Tennessee has a constitutional provision (section 8, art. 11) against class legislation, hut permits classification of counties by population for some purposes and not for others. In any view, this statute is no more obnoxious than if it named and applied only to the city of Paris; and, since charters are granted by special act, they may be amended by special act, relative to that city alone. Note 30, section 8, art. 11, Shannon’s Ann. Const, of Tenn.

If this statute were to be taken as ratifying the named contracts, even though they had been induced by fraud, it might be open to the constitutional objection, but we see no such intent. We think its only purpose and effect, as to our contract, are to clarify, and. possibly amplify, the power of conveyance and sale' given to the city by the original charter; it was in effect nothing but an amendment of the charter in that respect.

Whatever the Legislature might originally have authorized, it can ordinarily ratify; and such a ratification is equivalent to an original grant of power. Los Angeles City Water Co. v. Los Angeles (C. C.) 88 F. 720, 742. See, also, cases cited in note 84, p. 292, C. J. Art. Municipal Corporations.'

It is also urged that the ratification was unconstitutional because the act was not read three times in each house, as required by section 18 of article 2 of the Constitution of Tennessee; and, in support of this objection, we are cited to Erwin v. State, 116 Tenn; 71, 80, 93 S. W. 73, and State v. Base Ball Club, 127 Tenn. 292, 300, 154 S. W. 1151, Ann. Cas. 1914B, 1243. No evidence was introduced to support this objection; hut we aesume that we should take judicial notiee of the published journals of the Legislature — ■ at least within the states of this circuit. Their contents upon this subject are stated in the note.

We see no way in which judicial notiee can extend further than the journals themselves. If the original bills are preserved, and could be used for comparison to amplify the journals, they must be introduced and proved. In each of the eases cited, the act in question had the effect to create a crime, and the amendment, made in both the body of the bill and in the caption, enlarged its effect, and made that action a crime which otherwise would not have been. The utmost inference which can be drawn from the journals in this case is that the title and body of the act, as introduced, were in the final form to and including “State of Tennessee,” and that the amendment, made upon' the third reading, limited its effect to the five classes of counties specified. Neither the letter of the Constitution nor the authority of the eases cited, nor the public policy said to be involved, leads necessarily to the conclusion that this act is, for this reason, unconstitutional. See Tenn. Co. v. Hooper, 131 Tenn. 615, 175 S. W. 1146. The federal courts, lacking a controlling decision by the state court, do not, except in the clearest eases, hold that the state Legislature has violated the state Constitution; and the violation, in the present ease is, to say the least, not clear.

The same general consideration applies to the further objection that the statute is unconstitutional because section 17, art. 2, of the. Constitution, says that no bill shall embrace more than one subject. The subject of this bill is the validation of certain eon-tracts made by certain classes of cities. There is nothing to show that they are not sufficiently related to constitute one subject, within the meaning of the Constitution; and we find no state court decision to the contrary.

Since we do not interpret this ratification statute as intended to bar disaffirmance on the ground of fraud, that subject must be considered upon this record. It is not easy to select, out of the general allegations and proofs herein, the definite basis upon which the claim of fraud must rest in order to have legal recognition; but, if we lay aside all those matters of fact and opinion about which the mayor and council knew as much or more than Byrd, and those alleged representations as to the effect of the contract which were in the teeth of its plain terms and about which intelligent business men, dealing at arm’s length with a purchaser, cannot be heard to say they were deceived, there remain only the claims that the city attorney, two members of the council, and the operating head of the plant had some secret adverse interest which undermined tho city’s conclusion to make the contract, and entitled it to rescind when this was afterwards discovered. As to those other than the city attorney, there is no proof requiring serious attention. As to him, it appears that he advised, and to some extent ■represented, the city in details which arose in the drafting of the contract, and perhaps approved of the contract in a general way, that the city did not pay him for these services, and that he was paid therefor the sum of $2,000 by Byrd. The company insists not only that, as a purchaser from Byrd, it should not answer for Byrd’s misconduct in this respect, if any there was, but that there was no misconduct. It insists that the record shows that the city attorney had nothing to do with the city’s determination to make the contract, and that the mayor and council understood that the city attorney’s charges for his services were to be paid by Byrd, and knew at the time that they were so paid. We find no occasion to pass upon these issues; but, for the purposes of this opinion, assume, not only Byrd’s agency, but also the fact of Byrd’s payment to the city attorney was not known to, or approved by, the city, and was ■of sufficient importance so that the city might have rescinded, promptly upon discovery.

While it is to be conceded that a municipal contract which is void for lack of power to make it cannot become valid by acquiescence or ratification, yet, when the power exists and the city has entered into a contract with another party, which contract is later said to have been induced by fraud practiced upon the city, the rule is the same as between individuals. The city, upon discovery of the fraud, must elect, with the promptness which the circumstances require, whether it will continue to take the benefit of tho contract, and therefore affirm, or will repudiate and demand such restoration of the former status as the then developed situation permits. The city can claim no exception from the familiar rule.

This contract went into effect in January, 1926, provided for the leasing to, and contemplated the eventual sale to, the company, and the furnishing of light and water by the company, upon terms which were then believed to be — and are still by strong proof indicated to be — very advantageous to the city and its citizens. Among these terms were lease payments of about $2,500 per month, which would provide for the current interest on the city’s bonded debt and cover the city’s water and light and leave a monthly surplus; the reconstruction and modernization and extension of the plants, and particularly of the electric portion; and the payment of the city’s bonded debt, as it fell due. The company promptly proceeded with this part of tho contract, and made large investments in these improvements and extensions. No dissatisfaction was expressed for several months. Then a controversy arose as to whether the company was obliged to furnish, without charge, water for certain drinking fountains. No agreement being reached, the city, in July, 1927, filed a bill for the. specific performance in this respect of its contract, as the city understood it. This ease was prosecuted by the city to final decree in its favor, which seems to have been given on May 28, 1928. From this decree the company appealed, and the decision of the appellate court affirming was rendered at some time after the present suit was commenced. During the trial of this drinking fountain ease, and on August 16, 1927, the former city attorney testified fully to the facts as to the receipt of this fee by him in the manner which has been stated. The record of that trial indicates that this fact was, before that time, known to the successor attorney and to the city, but full knowledge after this date cannot be denied. The present suit for rescission was not commenced until June 9, 1928, an interval of more than nine months. During this time, the city continued to receive its monthly payments under this contract, and the company continued to perform and to make extensions, reconstructions, and improvements, and, as late as March, 1928, paid $25,000 of the city bonds. In fact, one monthly payment under the contract was received by the city after this rescission suit was begun. These facts seemingly lead so inevitably to the conclusion that the city elected to affirm and not to rescind that we must go to the excuses alleged to neutralize this apparent affirmánee. We find nothing of substance. The present city attorney testifies in rather vague and general terms that the fraud was not discovered until shortly before the bill was filed; but he does not contradict the specific facts which we have recited. He says, also in general terms, that, after the discovery of the fraud, there were negotiations between the city and the company for a revision of the contract. A distinct notice from the city that because of the discovered fraud it intended to rescind unless the company would make concessions, and a serious consideration of this proposition by the company, doubtless would excuse considerable delay in actual rescission. Even that might not justify the continued acceptance of benefits and claims of other benefits under the- contract; but there is nothing to show that any such notice was given or any real negotiations entered upon.

Our conclusion is that, without considering the other substantial questions involved, the bill must be dismissed, because it clearly appears that, after the city knew the facts upon which it now bases its claim of right to rescind, it not only unduly delayed rescission, but it continued to accept benefits under the contract, and thereby affirmed.

The decree is reversed, and the ease remanded, with instructions to dismiss the bill.

       House Bill 1340 passed its first reading on April 20, 1927 (H. J. 1814), its second reading on April 22 (H. J. 1421), and its third upon April 28 (H. J. 1595). Upon the third reading Senate Bill 944 was substituted for H. B. 1340, and it passed its third reading in this substituted form. Nowhere in these Journal records is the title of the bill given in full, hut each reference is made by some short or summary title, no two of them being alike. The Journal therefore gives no- information, either as to the title or the body of House Bill 1340, in its original form.
      Senate Bill 944 passed its first reading on April 20 (S. J. 889), its second on April 21 (S. J. 893), and its third on April 26 (S. J. 1062). This also is referred to each time merely by a short identifying title, not being the same as any of the short titles used in the House Journal for 1340; hut there is •nothing to show that, in the body of the bill or the full title, it differs from the same parts of 1340. Upon the third reading, this bill 'was amended as to *its caption and as to its body so as to apply only to the classes of counties specified in the act as published. There is, therefore, nothing to show that any material change was made, either in the body •or the title of the act; or, if it nevertheless might he presumed that there was a material change, it probably consisted (or perhaps did) in lessening the territory to which the act applied.


author: ALSCHULER, Circuit Judge.

text:
    BUICK MOTOR CO. v. CITY OF MILWAUKEE, WIS., et al.
    No. 4418.
    Circuit Court of Appeals, Seventh Circuit.
    April 6, 1931.

      O. A. Oestreieh, M. O. Mouat, and P. J. E. Wood, all of Janesville, Wis., and John Thomas Smith, of New York City, for appellant.
    Walter J. Mattison and John M. Niven, both of Milwaukee, Wis., for appellees.
    Theo. W. Brazeau, of Wisconsin Rapids, Wis., for Wisconsin Tax Commission.
    Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.
   ALSCHULER, Circuit Judge.

The appeal involves the validity of a reassessment by the Wisconsin tax commission for state income taxes for the years 1917 to 1924, inclusive, of appellant, Buiek Motor Company, a Michigan corporation licensed to do business in Wisconsin.

The company has a capital stock of $10,-000, all owned by General Motors Company, a Delaware corporation, and carried in the names of its nominees.

Under date of January 2, 1917, “General Motors Company * * * termed the Seller” contracted in writing with “Buiek Motor Company * * * termed the Buyer” whereby “the Seller agrees to sell to the Buyer and the Buyer hereby agrees to buy from the Seller the entire output of automobiles and their parts of the (seller’s) ‘Buiek’ factory at Flint, Michigan, upon a basis which will result in an annual net profit of Twenty-five Hundred Dollars to the Buyer on said business.” The contract has unlimited duration.

To appellant’s Wisconsin branch, with headquarters at Milwaukee, there was assigned as its territory the northern peninsula' of Michigan and all the state of Wisconsin, except the southern tier ofi e.ounties, which counties were part of the territory assigned to and served from the Chicago branch.

During the years in question appellant’s annual sales of cars and parts ranged from a minimum of $89,000,000 to a maximum of $231,000,000; whereof the annual sales of the Wisconsin branch were from $2,454,000 to $6,800,000. The ears and parts’sold by the Wisconsin branch were billed to the branch by appellant at about the same price as to independent distributors, and were shipped from General Motors’ factory at Flint, Mich., and remittances were made by the customers to the Wisconsin branch, whieh, having no bank account of its own, sent the remittances as received to General Motors.

For the year 1917 appellant returned for Wisconsin tax an income of $5,018.42, but later contended that its income was only $2,-500, which was the income whieh it annually returned for some years thereafter. For 1919 the tax commission, over appellant’s protest, added as further income $80,051, whieh represented, in the main, Wisconsin’s proportion of an aggregate amount of $1,419,290'.16 withheld by appellant as reserve for dealers’ rebates.

In 1920 the tax commission signified its dissatisfaction with appellant’s, general plan of return of income, and there ensued considerable correspondence and discussion between them, resulting, in -1921, in the inauguration of the general practice of treating appellant’s Wisconsin branch, for income purposes, as though the branch were an independent jobber or distributor of the Buiek products. Amended returns were accordingly filed for 1919 and 1929 (but none for prior years) whereunder there was refunded to appellant $2,993.78 of the income tax it had paid for 1919. For the subsequent years in issue appellant assumed to return its income upon this basis, and paid its income taxes thereon. The data for the annual returns were supplied by appellant.

But in 1926 the commission caused its own audit to be made of appellant’s accounts to ascertain whether the returns which had theretofore been made truly reflected its income. After an apparently exhaustive investigation of appellant’s accounts, as well as those of General Motors, the commission concluded that these returns -did not truly reflect the income and ordered a reassessment, whereby there was added to the income as returned sufficient to increase the tax which had been paid for the years in question, plus interest, by an aggregate for the period of $226,734. This reassessment of income, and the tax thereon, was sustained by the District Court, whose decree is the subject of this appeal.

As to the accuracy of the commission’s audit there is no controversy. In the concluding paragraph of appellant’s reply brief it is said: “The fact of the matter is that the audit of the commission is substantially correct, its premise or base of approach admitted ', * ■ * * ”

It is insisted for appellant that the transactions of 1929 and 1921 between appellant and the commission estop the commission from questioning returns made in pursuance of the understanding apparently then reached. Apart from any question of the right of the commission to bind the state by any understanding or contract, it does not appear that what was then done rose to the dignity of a contract, nor that there was a hearing and decision by the commission adjudicating the rights of the parties. In any event, it seems plain that at that time all of the salient facts bearing upon appellant’s income were not before the commission. Indeed, it is contended for appellee that in making the reassessment the commission did not depart from the general basis of understanding which was reached in 1921. To be sure, if the returns made by appellant had embodied the figures as found by the commission’s audit, the discrepancies between them would not appear. To the extent therefore that appellant’s returns were erroneous— whether intentionally or mistakenly — the commission could not be estopped by any understanding reached in 1921, as that understanding did not and could not properly bind the commission to specific items or figures of income.

In Judge Geiger’s further discussion of this proposition in his opinion in the District Court, to which we make reference, he has abundantly demonstrated that this contention of appellant is not well grounded. 43 F.(2d) 385.

But it is insisted that the intercorporate contract relation should be given effect, and that the stipulated $2,599 of net profit to appellant should be held to be the maximum of appellant’s actual taxable income for each of the years in question. Whether the contract, as between the contracting parties, is upon its face fraudulent, does not concern the state in the matter of its taxes upon income derived from business transacted within its limits. Whatever other purpose such a contract might have, the conclusion seems quite irresistible that one of its objects was to transfer the income arising from the business of such states as then had, or might thereafter enact, an income tax law, so that the income would not be taxable in the state where earned. This motive might not alone warrant the state in ignoring the contract, but if appellant, notwithstanding the contract, continued to earn the income upon business transacted within the state, the contract would not serve to defeat the right of the state to tax the income so earned.

The function of selling the product was a highly essential department of General Motors’ business, scarcely less so than the manufacturing end of the operations, and was entitled to be credited with a substantial share of the profits of the general business. By turning over to General Motors the remittances for sales made by appellant’s Wisconsin branch, the profits which appellant earned on its Wisconsin business were diverted to appellant’s one stock owner — General Motors. While appellant carried on this vast business under an arrangement with General Motors whereby the profits realized at once passed to General Motors, the profits constituted taxable income in Wisconsin ere they passed to the single beneficial owner of the capital stock. Distribution of corporate profits to or among stockholders, by whatever form, does not relieve the corporation from income tax on what is so earned and distributed. Cliffs Chemical Co. v. Wis. Tax Comm., 193 Wis. 295, 214 N. W. 447, 449; Shaffer v. Carter, 252 U. S. 37, 49 S. Ct. 221, 64 L. Ed. 445; Houston, etc., Co. v. United States (C. C. A.) 259 F. 1; Rensselaer & S. R. Co. v. Irwin (C. C. A.) 249 F. 726; West End St. Ry. Co. v. Malley (C. C. A.) 246 F. 625; Judson Freight Forwarding v. Commonwealth, 242 Mass. 47, 136 N. E. 375, 27 A. L. R. 1131.

It is maintained for appellant that General Motors was also licensed to do business in Wisconsin, and that if this income from the selling of Buick products were taxable in Wisconsin it should be assessable to General Motors as its income. But appellant is a distinct corporation, which had contracted with General Motors to buy and sell Buick automobiles and parts, and it was this separate entity which transacted this business in Wisconsin, and to this entity the state had a right to look for its tax upon the profit arising in Wisconsin from the transaction of this business there. Judge Geiger’s opinion has, in our judgment, well demonstrated that the intercorporate contract does not limit the state to a tax upon the income which the contract assumes to prescribe.

But if the binding effect of the transactions of 1921 were assumed, as contended for appellant, appellant would be likewise thereby bound, and, failing then and thereafter to have fully made the disclosures of income which those negotiations assumed would be made, it may not complain if thereafter the true state of the income is made to appear and its taxes reassessed accordingly. For the taxable years 1917 and 1918 it does not appear that any reassessment was made at all pursuant to the 1921 understanding, nor that the alleged agreement of 1921 was ever acted on as to those years.

The right to make such reassessment is recognized in section 71.25 (1), Wisconsin Statutes enacted in 1925.

In a quite comparable situation, where it was contended that the act should not be applied retroactively, and, if so applicable, would be unconstitutional, the Supreme Court of Wisconsin said that in passing the act the Legislature “merely directed tbe Tax Commission. to conform to a method which would have' been their duty to adopt without the act. But even if applied retroactively, the statute would not be unconstitutional on that ground.” Cliffs Chemical Co. v. Wis. Tax Comm., supra.

We find no merit in the suggestion that the sales made to dealers in the northern peninsula of Michigan were not Wisconsin business, and that the profit thereon was not includable in the Wisconsin returns. The sales were made through and by, and the remittances therefor made to, the Wisconsin branch at Milwaukee, and were in essence Wisconsin business. If the fact that the shipments to the northern peninsula were made directly from Flint constituted them Michigan and not Wisconsin business, then, by the same token, the sales made in that very considerable territory comprising the southern tier of Wisconsin counties, although made by the Chicago branch, would be Wis- ■ consin business and the profits taxable in 'Wisconsin. But appellant did not include in its Wisconsin returns the income on that business, and it would thus scarcely be in position to maintain that the northern peninsula business transacted through the Wisconsin branch was not Wisconsin business.

It is contended that section 71.25 is unconstitutional because it grants to the commission judicial powers, if authorizing it to determine whether the intercorporate contract was in fraud of the Wisconsin income tax law. On this we need say no more than that the statute was distinctly held constitutional by the Wisconsin Supreme Court in Cliffs Chern-, ical Co. v. Wis. Tax Comm., supra.

It is further contended that the reassessment in question deprives appellant of prop-* erty without due process of law, in violation of the Fourteenth Amendment to the Constitution of the United States. To the extent that this contention is predicated on the assumption that appellant is taxed upon income which it did not receive, that proposition of fact has been heretofore sufficiently considered, and disposed of contrary to appellant’s contention.

The Cliffs Chemical Co. case, where the tax was upheld on property which, as produced, was distributed to the corporate stockholders, and where the same federal constitutional proposition would be involved as here, was heard on error in the United States Supreme Court, which dismissed it “for'want of" a substantial federal question.” Cliffs Chemical Co. v. Wis. Tax Comm., 277 U. S. 574, 48 S. Ct. 435, 72 L. Ed. 994.

Appellant insists that, in any event, it is entitled to such a deduction from the ascertained income as would be the equivalent of such a federal income tax as would have been required to be paid by an independent jobber or dealer who had earned on Wisconsin business the same income which was found to have been earned by appellant for the years in question. Appellant contends that an independent dealer -who had earned this income would have been required to pay a federal tax very much larger than the federal taxes which in fact the commission did deduct from income.

The commission dealt with the federal income tax feature by apportioning to the Wisconsin income a proportionate share of the entire federal income tax which was paid for the respective years by General Motors, whose returns to the federal government included the profits of all its subsidiaries, including appellant. The apportionment made by the commission is not attacked, but the method is questioned. For instance^ for the year 1921 the deductible losses of General Motors Company were sufficiently heavy to neutralize its entire profits and it paid no federal income tax for that year; and so for that year the commission made no deduction on account of federal income taxes. To the extent that in other years the income of General Motors was reduced by deductible losses, the proportion of federal income taxes paid attributable to Wisconsin income wonld be proportionately less, whereas it is contended the profits of an independent dealer transacting the Wisconsin business would not likely have been subject to such reduction.

Of course we cannot know what deductions from income an independent dealer would have been entitled to make. There are many contingencies which could not have been anticipated. Once it is determined what income was taxable to appellant, the tax will not be defeated by embarrassments in the way of determining what deductions from income the taxpayer might have been entitled to have had allowed.

If the practice was, as it seems to have been, to determine the federal income tax upon a consolidated return by General Motors and all its subsidiaries, we cannot see that the state was derelict in its duty or unfair toward appellant in deducting from Wisconsin income, for purposes of the state income tax, such a proportion of federal income taxes paid by the parent company as would be attributable to Wisconsin income. If none were paid, then none would be deductible. The gross amount so deducted by the commission for federal taxes paid by General Motors, and attributable to Wisconsin income, during the period in question, was $422,237.82, and we find no substantial ground for complaint in the contention that the deduction should have been made.

Under the circumstances appellant is not in position to complain of the method adopted, particularly as the record makes no disclosure of a definite plan which is more fair.

Generally speaking, strict máthematical certainty cannot reasonably be expected in such matters. In the routine of taxation as applied to ordinary business, slight departures either in method or computation involving trivial amounts will.not be noticed. Having in mind the magnitude of the business here involved, we believe the commission reached a conclusion which sufficiently approximates justice between this taxpayer and the state as to require approval of the result.

The decree of the District Court is affirmed.

      “(1) Wken any corporation liable to taxation under this act conducts its business in such a manner as either directly or indirectly to benefit the members or stockholders thereof or any person, interested in such business, by selling its products or the goods or commodities in which it deals at less than the fair price which might be obtained therefor, or where a corporation, a substantial portion of whose capital stock is owned either di’rectly or indirectly by another corporation, acquires and disposes of the products of the corporation so owning a substantial portion of its stock in such a manner as to create a loss or improper net income, the commission may determine ’the amount of taxable income of such corporation for the calendar or fiscal year, having due regard to the reasonable profits which but for such arrangement or understanding might or could have been obtained from dealing in such products, goods or commodities.”


text:
    CITY OF ST. PAUL v. CERTAIN LANDS IN CITY OF ST. PAUL, MINN., et al.
    No. 8922.
    Circuit Court of Appeals, Eighth Circuit.
    March 16, 1931.

      L. L. Anderson, of St. Paul, Minn. (Eugene M. O’Neill, of St. Paul, Minn., on the brief), for appellant.
    William P. Hunt and Thomas C. Fitzpatrick, both of St. Paul, Minn. (William H. Lightner, Calvin Hunt, Oscar E. Holman, and Harry Weiss, all of St. Paul, Minn., on the brief), for appellees Certain Lands in the, City of St. Paul and others.
    John M. Rees, Sp. Asst. to U. S. Atty., of St. Paul, Minn. (Lewis L. Drill, U. S. Atty., of St. Paul, Minn., on the brief), for the United States.
    Before STONE and GARDNER, Circuit Judges, and WOODROUGH, District Judge.
   GARDNER, Circuit Judge.

This is an appeal by the city of St. Paul from an order dismissing its appeal to the District Court from-the awards of the commissioners made in condemnation proceedings. On June 14, 1929, the United States of America filed a petition in the lower court for the condemnation of certain lands located in the city of St. Paul as a post ¡office site. The proceedings were brought under chapter 41, Mason’s Minnesota Statutes for 1927 (sections 6537 to 6578-2), and'under sections 1 and 2, chapter 728 of the Conformity Act, 25 -U. S. Statutes, 357' (title 40, §§ 257 and 258, USCA). Notice of the proceedings was given to all interested parties, including the city of St. Paul. Pursuant to such notice, the petition came on for hearing before'the court on August 5, 1929’, at which time it was allowed, and commissioners were named, pursuant to the provisions of the Minnesota Statutes, to appraise and assess the damages sustained on account of the appropriation and -taking of the property. On November 22, 1929, the commissioners filed their awards in gross on the several parcels of land involved, and on December 14, 1929, the Commercial Station Post Office, Inc., owner of -certain of the property, together with the trustees under a deed of trust on its property, securing certain bonds, appealed from the .awards. The properties were the subject of special assessments for local improvements which were in process of construction at the time of the institution of the condemnation proceedings. The improvements had not at that time been completed, nor had the assessment therefor been spread. On December 26, 1929, the city of St. Paul filed its petition in intervention, alleging therein:

"That said commissioners, after arriving at the value of the lands above described, and after fixing the value thereof and the amount of awards to be made to the owners thereof, added to such .awards the amounts of the assessments which have been spread against the said property by the City of St. Paul and made an award in gross, and said gross award has included therein the amount of said assessments.”

In that petition, the appellant asked that the court impress the funds in the hands of the United States of America, awarded to the defendants, with a lien in the sum of $28,-973.31, and for a decree declaring the city to be entitled “to participate in skid condemnation fund for the sums expended by it in increasing and enhancing the value of the defendants’ property.” On December 28, 1929, it perfected an appeal from the award of damages made by the, commissioners. Thereupon, the other landowners and defendants filed a motion to dismiss such appeal, and also filed a motion to dismiss its bill-of complaint in intervention. Both of these motions, together with a motion to amend the complaint in intervention, were heard together, .and the court granted the motion to amend the complaint in-intervention, denied the motion of the defendants to dismiss the complaint in intervention, and granted the motion of the defendants to dismiss the city’s appeal, and it is from this last-named order that the present appeal was taken.

It is observed that, after the commissioners had been appointed and qualified, the court instructed them as follows:

“Where there is a conflict as to the ownership of any parcel of real estate, such as a claim of title by adverse possession, a tax sales or otherwise, you will not undertake to decide that question, but will merely ascertain and report the value of each parcel, irrespective of any question of title.”

Acting under this instruction, the commissioners ascertained .and reported the value of eaeh parcel of ground, as is shown by the following paragraph of their award:

"We also report that * * * because there are or may be tax liens and other encumbrances existing upon said tracts or some of them, therefore rendering it doubtful as to whom the award or awards of the damages should be paid, therefore, we have made the award in gross as to each tract of land involved which is apparently under one ownership and used for a single purpose so that the petitioner may pay each award to the clerk of the above named-court, to be paid out under the direction of the court.
“We, therefore, find .an award of the damages to each tract or parcel of land herein described as a consequence of the taking by these proceedings in the sum set opposite the number and description of each of said tracts, the said award to be distributed to the owners, according to their respective interests in said premises and the priorities with respect thereto and, in the absence of agreement, under the direction of the court.”

The awards amounted in the aggregate to $517,775. The total asserted claim of the city for special assessments amounted to $28,-973.31, and the award for each separate piece of property exceeded by many times the claimed assessment against each separate piece of property. In this state of the record, we are of the view that the court was correct in its decision dismissing the appeal of the city of St. Paul. Being of the view that the order was a correct one, this court will not reverse it, because the lower court may have based its decision on insufficient or erroneous grounds. Ramsay v. Crevlin (C. C. A.) 254 F. 813; Stoffregen v. Moore (C. C. A.) 271 F. 680; Clark v. Belt (C. C. A.) 223 F. 573; Bunday v. Huntington (C. C. A.) 224 F. 847.

The city had no interest in prosecuting an appeal from the awards, because, confessedly, it had only a limited or special property or interest in the property, and the awards far exceeded that interest. By section 6546 of the Minnesota Statutes it is provided that:

“If for any reason it be doubtful to whom any award should be paid, the petitioner may pay the same to the clerk, to be paid out under the direction of the court.”

The government is not interested in the question of the proper distribution or apportionment of this award. Its duty will have been performed when it pays the amount- of the award into court. United States v. Dunnington, 146 U. S. 338, 13 S. Ct. 79, 83, 36 L. Ed. 996; United States v. Eisenbeis (C. C. A.) 112 F. 190; Lewis, Eminent Domain, § 894; Eyre v. City of Faribault, 121 Minn. 233, 141 N. W. 170, L. R. A. 1917A, 685.

The Supreme Court of the United States in United States v. Dunnington, supra, said:

“It is a necessary deduction from our conclusion upon the other branch of the case that the appraised value of the property represents the whole fee, and the interests, both present and prospective, of every person concerned in the property, and such are the authorities. * * *
“The action * * “ has thus the distinctive quality of a proceeding in rem, a taking, not of the rights of designated persons in the thing needed, but of the thing itself, with a general monition to all persons having claims in the thing. When, by the appraisement of the commissioners, the price of the thing is fixed, that price stands in place of the thing appropriated, and represents all interests acquired.”

It seems clear that the city w.as not in any manner aggrieved or prejudiced by the award made by the commissioners because it was’ more than sufficient in amount to meet the city’s demands, whatever they might ultimately be, and the only question involved on the .appeal was the amount of damages.

Appellees have made a motion in this: court to dismiss the appeal from the order of the lower court. On the merits, the appeal, involves only a question of practice, and as' the motion to dismiss raises substantially the same question, we have concluded to dispose of the case on the merits of appellant’s appeal.

The order appealed from is therefore affirmed.