author: WOOLLEY, Circuit Judge.

text:
    KOTABS, Inc., et al. v. KOTEX CO.
    No. 4581.
    Circuit Court of Appeals, Third Circuit.
    June 25, 1931.

      David Stoffer and Arthur T. Vanderbilt, both of Newark, N. J., for appellants.
    Cyril A. Soans, of Chicago, 111., and Harold D. Beatty, James A. Dilkes, and Cola G. Parker, all of New York City, for appellee.
    Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.
   WOOLLEY, Circuit Judge.

The plaintiff’s registered trade-mark is “Kotex”; its trade name “Kotex Company.” The defendants appropriated the whole of the plaintiff’s trade-mark and the outstanding word in its trade name and used it, lawfully, they contend, in advertising and selling an altogether different product. The plaintiff, on its bill charging infringement of the trade-mark and unfair competition, had a decree by which the court found the trade-mark valid, ownership of the mark in the plaintiir and infringement by the defendants and enjoined the defendants from using the mark “Kotex” and the word “Kotabs”—their trade name—in marketing their wares. The defendants appealed.

Admitting the plaintiff’s right to use its trade-mark on products within the class under which it was registered, the defendants raise as the sole question for review the extent of the plaintiff’s rights with respect to its mark and thereby seek to restrict the question to the rule against registering similar trademarks on merchandise of “the same descriptive properties” (33 Stat. 7255 § 5 [15 USCA § 85]) and to the rigid law which for a time was the outgrowth of the rule. The true question, we -find, involves more than that. It can easily be seen in a brief statement of ths facts.

In 1919 the Cellueotton Products Company, the plaintiff’s predecessor, engaged in the business of manufacturing catamenial bandages—sanitary pads or napkins for use by women during menstruation—made of multiple layers of cellulose fiber treated with a suitable deodorant. The product was, and is, unpatented and depends for its commercial success ultimately on its own merit but primarily and essentially on its being made known to women in vast numbers.

Just how that could be done was a serious question, for the ordinary fields of advertising such as leading news-papers and periodicals were, because of the nature of the subject, closed to advertising of this character. Nor, for the same reason, could advertising by other methods, such as counter and window display cards plainly stating the use of the product, be pursued. How then acquaint the public? Here indeed was a real problem. The plaintiff’s predecessor—the first in the business in this country—solved it by seeking a trade name for the product which in nowise suggested its use. It hit up*' on the word Kotex. That is a coined word, arbitrary in the extreme and absolutely without meaning, except as later it identified the plaintiff’s products. The original company and then the plaintiff company commissioned artists of high rank to design attractive advertisements which they did in various types, always incorporating somewhere the single word Kotex, without words disclosing the use of the product. For instance, one counter and window display card showed a trained nurse in her attractive uniform with a box marked Kotex under her arm—nothing more. Thus the plaintiff relied upon the curiosity of women to inquire the use of the product so advertised.

The plaintiff’s predecessor registered the mark in 1920 and in that year spent $150,000 in advertising sanitary pads, belts and aprons with the mark, and developed a business of $300,000 in 1921. The plaintiff, succeeding the Cellueotton Products Company, was convinced that for the business to be successful the word Kotex must be nationalized and embarked on an advertising campaign, in which, in ten years, it expended $15,000,000—• now, $2,500,000 a year—and developed a business of $10,000,000 annually. The trademark, meaningless except as the commercial signature of the plaintiff, stands for its good will and has acquired great value, to retain which, however, the plaintiff has had to fight constant infringements by such words as Pro-tex, Rotex, Zeltex, Puritex, Swantex, Cotton-tex, Femotex, Baytex, Sani-tee, Santex, all of which it has in one way or another successfully combated, until the defendants came along and, unlike the others, did not-attempt evasively to imitate the trade-mark; .but bodily appropriated the trade-mark itself. They justify on the ground that they use the mark on a product which is in a class entirely different from that under which the plaintiff’s mark was registered.

On the question of lawful use of one mark by two persons on products belonging to different classes and therefore not having “the same descriptive properties,” urged by the defendants to be dispositive of this ease, we shall state certain settled principles of the law of trade-mark and unfair competition which control the decision of the questions in suit. First, no one can have an absolute ownership in or an exclusive right to use a word or name as a trade-mark. Rosenberg Bros. & Co. v. Elliott (C. C. A.) 7 F.(2d) 962; Beech-Nut Packing Co. v. P. Lorillard Co. (C. C. A.) 7 F.(2d) 967, affirmed 273 U. S. 629, 47 S. Ct. 481, 71 L. Ed. 819. Property in a trade-mark—-if such there be—or, moré correctly, the right to use a trade-mark exists only when the mark is appurtenant to and used in connection with a business. Hanover Star Milling Co. v. Metcalf, 240 U. S. 403, 413, 414, 36 S. Ct. 357, 60 L. Ed. 713.

Recognizing this law, the Congress provided that a trade-mark lawfully owned and used by one shall not be registered to another for use on merchandise of “the same descriptive properties” (15 USCA § 85). In order effectively to carry out this provision the Commissioner of Patents, as directed by the act, has classified merchandise with respect to its properties and, with the qualification presently to be stated, will register the same trade-mark for use on merchandise of different descriptive properties. So it happens in some eases where trade-mark infringement is the only issue or is one of several issues, as in Rosenberg Bros. & Co. v. Elliott, supra, and Beech-Nut Packing Co. v. P. Lorillard Co., supra, the first, and, it may be, the only question is whether the alleged infringement is use of the mark on a product which falls within or outside the class under which the trade-mark is registered; as in Beech-Nut Packing Co. v. P. Lorillard Co., supra, it was held that a trade-mark for foods was not infringed by using the same mark on tobacco; and as in Rosenberg Bros. & Co. v. Elliott, supra, a suit for infringement of a -trademark registered under the classification of men’s clothing, the court, finding infringes ment, held that men’s hats and caps though not literally yet actually came within the classification. But sometimes, contrary to the defendants’ thought, there is more in a trademark infringement ease than class determination. Infringement may be found when goods, though different, are so related as to fall within the mischief which equity should prevent. This principle was applied in Aunt Jemima Mills Co. v. Rigney & Co. (C. C. A.) 247 F. 407, L. R. A. 1918C, 1039, and Eastman Kodak Co. v. Kodak Cycle Co., 15 Rep. Patent Cases 105; (and eases cited in the margin of Rosenberg Bros. & Co. v. Elliott, supra), where it was found, for instance, that flour and syrup though different are nevertheless food products and photographic cameras and bicycles, being still more different, would, if marketed under the same traded mark—Aunt Jemima or Kodak—suggest a common origin, induce belief in the public mind that the infringer’s wares are those of the mark owner and enable the wrongful user to reap the benefit of the owner’s good will greatly to his damage.

Turning to the fact issue of trade-mark infringement, the plaintiff’s mark, Kotex, is registered under the classification of dental, medical and surgical appliances. The defendants’ product is a medicine in the form of a tablet used for relieving menstrual pains and other pains, and is sold under the mark Kotex by a corporation named Kotabs, Inc., evidently a contraction of the two descriptive words of its product—Kotex-Tablets.

The plaintiff’s sanitary pad is eoncededly not a dental or surgical appliance. To be a medical appliance it is, not necessary that it contain medicine. It may be, and we think it is, a medical appliance in the sense that adhesive tape is one when used on a sprained ankle, a belt used as an abdominal support, absorbent cotton used as a carrier of medicine for earache, toothache, sore throats and inflamed narial channels and the like. No one of these appliances has curative qualities, yet, like the pad, each has to do with a physical ailment. Ninety per cent, of the drug stores in the United States handle the plaintiff’s product and sixty-five per cent, of the product is sold through drug stores or drug departments of department stores; the remainder is sold through stores dealing in women’s wares and hotel and station ■ waiting rooms for women. The defendants’ product is undoubtedly a medicine, yet it is a medicine for the same physical ailment for which the plaintiff’s product is used as an appliance. The two products are related to each other because related in different ways to the same subject. The defendants’ representation that their product besides being good for menstrual pains is good for other pains suffered by persons of both sexes and of any age does not alter tbe fact that it is made and specifically advertised for use in tbe one ailment for which the plaintiff’s appliances are used. The defendants’ advertisements and sale of their wares under the plaintiff’s restricted trade-mark would inevitably suggest to a woman who favorably knows the plaintiff’s bandages that the defendants’ medicine is of the plaintiff’s make. A woman in this instance is not the “casual purchaser” of the cases; she is an exceptional purchaser in that she would, through modesty, hesitate to make inquiries of a drug clerk about the product and its origin.

It is clear from the evidence that, in* appropriating the plaintiff’s trade-mark and playing upon its trade name, the defendants intended to appropriate, and have in a measure appropriated, the plaintiff’s good will for whieh its trade-mark stands and on which its very existence depends. .The defendants’ offer made at bar to withdraw the words “menstrual pain” from their advertisements if they be allowed to continue the use of the mark does not remove the mischief of what still would be an unlawful use.

The applicable law on the issue of unfair competition is briefly this: There was at one time a rule of law, on whieh the defendants stand and at whieh they stop, to the effect that there can be no unfair competition unless there is actual competition of some kind. Borden Ice Cream Co. v. Borden’s Condensed Milk Co. (C. C. A.) 201 F. 510. But the law since then has taken a step onward. Unfair competition may exist not alone in the sale of goods of the same character but in the unfair appropriation and use of the trade name of another with the intention, of course, thereby to profit in the sale of goods either of a related character or that suggest the origin of the name appropriated. Such an act is not an infringement of a trade-mark, as a trade name, not a trade-mark, is there involved, but it is a trespass of the same nature as that committed by a man who applies another man’s name to his own goods. And it is a wrong whieh equity will enjoin even where .the goods of the two men do not enter into competition. Willys-Overland Co. v. Akron-Overland Tire Co. (D. C.) 268 F. 151, affirmed (C. C. A.) 273 F. 674; Vogue Co. v. Thompson-Hudson Co. (C. C. A.) 300 F. 509; Wall v. Rolls-Royce Co. (C. C. A.) 4 F.(2d) 333; Rosenberg Bros. & Co. v. Elliott (C. C. A.) 7 F.(2d) 962, 963.

On the fact issue of unfair competition there is ample evidence to sustain a decree for the plaintiff. The defendants not only appropriated the plaintiff’s trade-mark but appropriated its trade name and used it in a way to denote common origin of the two products and thereby deceive the public. Kotex is the plaintiff’s trade name as well as its trade-mark. In coining the word Kotabs as the trade name for their corporate actor, the personal defendants, with a world of real and imaginative words open to them, grasped the plaintiff’s trade name, split it up and, taking the catch syllable, built on it. Embossing on each of their tablets the letter K, the first letter of the plaintiff’s trade name, was, in connection with the advertisements, a further insinuation that the product was that of the plaintiff. All this was nothing short of fraud of the character required to sustain a finding of unfair competition. Rosenberg Bros. & Co. v. Elliott (C. C. A.) 7 F.(2d) 962, 966.

The decree is in all respects affirmed.


source: Caselaw Access Project

author: ST. SURE, District Judge.

license: Public Domain

text:
    ELLIOTT CORE DRILLING CO. v. SMITH.
    No. 6413.
    Circuit Court of Appeals, Ninth Circuit.
    June 22, 1931.

      Frank L. A. Graham, of Los Angeles, Cal., for appellant.
    Westall & Wallace, of Los Angeles, Cal., for appellee.
    Before WILBUR and SAWTELLE, Circuit Judges, and ST. SURE, District Judge.
   ST. SURE, District Judge.

Appeal from a final decree dismissing the bill of complaint in a patent infringement suit.

Elliott Core Drilling Company, appellant herein, is a California corporation engaged in the business of performing core drilling service and selling core drills. H. C. Smith, doing business under the name of H. C. Smith Manufacturing Company, appellee herein, is in the same business. Each of the parties has a patent on a core drill, and each brought suit against the other charging infringement. The suits were consolidated for hearing, but at the close of the trial the Smith suit was dismissed, appellee advising the trial court that the two forms of core drill were so identical that prior art anticipating one would necessarily have the same effect on the other. Appellee’s patent is No. 1,600,073, issued September 14, 1926, and that of appellant, known as the Oliver patent, is No. 1,-624,146, issued August 12,1927, to Fay Oliver. Both patents were eopending in the Patent Office. On May 26, 1924, prior to- the issuance of the Oliver patent, appellant made a contract with appellee and one Phipps to pay a royalty on the Phipps flush type of bit. Payments of royalty were made under the contract. Later the parties disagreed, payments stopped, appellant acquired the Oliver patent, notified appellee of alleged infringement, and brought this suit.

The Oliver patent relates to rotary core drills such as are used in the oil fields for obtaining samples of the formation' being drilled.

There are eleven claims in the patent, and appellant stands on all of them except claims 5 and 6. Claim 1 defines the Oliver invention, and embraces, in combination, the following elements:

In a rotary core drill the combination of '(a) a hollow core drill head having an exteri-orly downwardly tapered portion terminating in (b) an annular cutter at its lower end, (c) a plurality of initial cutting blades on said tapered portion of the head, extending outwardly beyond said annular cutter, and a (d) plurality of reaming blades on said head extending outwardly beyond said initial cutting blades, (e) the cutting edges of the reaming blades being above the cutting edge§ of the initial cutting blades.

In elaim 2 the extension of the initial cutters from approximately the lower end of the head to “a point above the lower end of the reaming cutters” is mentioned. The patent says these cutters “act to stir the fluid admitted through the ports 12 and the formation cut in a manner to prevent the flow of this fluid against the core being formed by the teeth 5,” and “the cuttings formed by the teeth 5 and cutters 14 travel upward through the space formed betw/een the tapered portion of the head 4 and the wall of the well hole formed by the edge 19 of the cutters 14.” (Italics are appellant’s.)

Attention is also directed to claim 11, in which it is stated “said initial cutters and said reaming cutters being arranged to travel in overlapping circular paths.”

Appellee relies on several defenses, including lack of invention, which only it will be necessary to consider.

Counsel for appellant frankly states in his brief that he makes no contention that the Oliver patent is a pioneer patent, nor of such scope that it is necessary to ask the court to apply the doctrine of equivalents. It is recognized that the core drilling art is a crowded one.

Appellant stresses the importance of the tapered portion of the drill head terminating in an annular cutter. Tapering a core barrel is not new. It is shown in the Bashara patent, No. 1,477,933, issued December 18, 1923, and in Elliott patent, No. 1,493,112. It is also shown in the “flush type” core used before the Oliver invention, and upon which appellant was paying a royalty to appellee before the commencement of this suit. Furthermore, Oliver, the patentee, disclaimed credit for adding a taper to the barrel. He testified in part: ■ “I don’t know where I got the idea of the taper. I really never thought anything about the taper. I suggested thinning them down, that is, thinning the lower end of it down. Before that Smith had been manufacturing core barrels with a taper on them for the same purpose for a long time.”

Next attention is called to a plurality of cutting blades, and such are old in the art Oliver admits this in his specifications when he states: “Core drills, as now constructed and in common use, have a plurality of oppositely disposed reaming cutters, of which there are generally four, all arranged to cut on the same level and above the lower or cutting edge of the core drill.” Reaming blades above and flush with the annular cutters are not new.

Then follows the claim of “extending the cutting blades outwardly beyond said initial cutting blades,” etc. This, by the way, seems to have been the extent of the alleged discovery by Oliver, for in disclaiming credit for the taper he says that his device was the Smith shoe except for the cutting surface. “I later got the idea of putting on four blades and bringing two down to be flush with the annular cutters and the cutting off of two of them, having two flush and two above the bottom of the cutters.” And again he said) “It was changing the cutting blades, is what it was.” Two sets of reaming blades, the lower being less in diameter than the upper, in combination -with annular cutters, are shown in Miller’s patent, No. 1,499,024. The same idea is shown to have been developed by Crum in “building out” or extending of alternate cutter teeth of the Superior Core Drill. In this connection Palmer, a driller in the oil fields, testified that in 1923 and 1924 he had extensive experience in using core drills and in taking cores; that he had used core drills furnished by the Elliott Core Drilling Company; that the Elliott core drills had foufi blades all flush on the bottom and all out to gage; that in the early part of 1924 he suggested to McCoy, an employee, and also to the superintendent of the Elliott Company that a change be made in the gage of the drills. “We talked it over,” said Palmer. “I think they took about % of an inch off of two blades, the two lower blades, so that we had two high ones and two low ones and the two low ones were narrower gage than the two high ones, so that maybe the two high blades would keep the hole straight and reamed while the two bottom blades did all the cutting. The change was made right after the conversation.” Palmer’s testimony is corroborated.

Appellant argues that the Oliver “patent has for its general objects the drilling of a straight hole by means of forming a stepped hole, the location of the cutters on the drill being such that the core will be protected from the flushing fluid, but which will also permit sufficient flushing fluid to get to the teeth to prevent burning.”

An examination of .Elliott patent, No. 1,-493,112, shows that the drill there provided will bore a stepped hole. The bit shown in the Moran patent No. 1,626,249 will likewise cut a stepped hole. And in the British patent to Belsham, Smith Exhibit 19, the specification states: “The crown cutter of the boring tube, is stepped to 'facilitate 'the cutting of the bore.”

Protecting the core from the flushing fluid and still permitting sufficient flow for cooling is disclosed in Elliott patent, No. 1,493,11-2; Foster patent, No. 1,574,731; Becker patent, No. 1,577,605; Moran patent, No. 1,626,249; Hill patent, No. 1,427,685; and in the British patent to Belsham.

Judge McCormick, who presided at the trial in the District Court, recognized that the problem before the alleged inventor was particularly the successful and improved practice of taking cores in subterranean operations in the oil industry.

“This field of endeavor,” says the learned judge, “has been comprehensively explored and extended for many years. This court had occasion to make a thorough examination of such art in Spengler Core Drilling Co. v. Spencer (D. C.) 10 F.(2d) 579, and the conclusions therein reached were such that it is rather difficult to establish invention in the art under consideration, in view of the many similar and successful methods of taking cores in the oil producing industries that have been utilized in various oil fields for some years past. The various methods and combinations shown seemed to be in the degrees of success rather than in the conception of basic ideas or processes that rise to the dignity of invention. The evidence in the suit at bar has confirmed such conclusions. There is wide-spread difference of opinion by experts and experienced oil producing operators, as to the relative efficiency and success of differently constructed core drills.”

In his opinion the learned trial judge further says: “It appears to me what Oliver did was to take the Bashara teachings and especially of Figure 2 and add two- of the old flush type blades. The record is clear that blades of that type were old in the art, and there was no invention in their employment in the taking of cores. I think that the difference in dimension of the blades in the two patents does not create any inventive distinction. It seems to me that if there be any difference therein, it is one that would appear readily to-any mechanic skilled in the art.”

A mere carrying forward of the original thought, a change only in form, proportions, or degree, doing the same thing in the same way, by substantially the same means, with better results, is not such an invention as will sustain a patent. Roberts v. Ryer, 91 U. S. 150, 23 L. Ed. 267; Belding Mfg. Co. v. Challenge Corn Planter Co., 152 U. S. 100, 14 S. Ct. 492, 38 L. Ed. 370; Market Street Cable Ry. Co. v. Rowley, 155 U. S. 621, 629, 15 S. Ct. 224, 39 L. Ed. 284; Railroad Supply Co. v. Elyria Iron Co., 244 U. S. 285, 292, 37 S. Ct. 502, 61 L. Ed. 1136.

The trial court, with opportunity to observe and examine the witnesses, found that “the record discloses that from the early part of 1924 down through the summer of that year, core drills that substantially combined all the elements shown by the patent in suit were in use in the oil fields in Southern California.”

Upon careful consideration of the prior art, and giving due weight to the well-established utility of appellant’s device and its highly favorable commercial reception, we are unable to find in it room for invention. The most which, to our minds, can be said is that Oliver has, in the exercise of a high degree of mechanical skill, selected and put together the most desirable parts of different devices in the same art, making a new structure perhaps better than any which preceded it, but in which each part operates in substantially the same way as it did in the old and effects substantially the same results. This is not invention. See Edwards v. Dayton Mfg. Co. (C. C. A.) 257 F. 980, 984.

We are in accord with the conclusions reached by the learned trial judge and we approve his finding above quoted. We are of opinion that the evidence in the record sustains both.

The deeree is affirmed.


text:
    UNITED STATES ex rel. BELARDI v. DAY, Commissioner of Immigration.
    No. 4401.
    Circuit Court of Appeals, Third Circuit.
    June 15, 1931.
    Adrian Bonnelly, of Philadelphia, Pa., and G. M. Cusumano, of New York City, for appellant.
    Phillip Forman, U. S. Atty., of Trenton, N. J., and Oliver Randolph, Asst. U. S. Atty., of Newark, N. J., for appellee.
    Before WOODLEY, DAYIS, and THOMPSON, Circuit Judges.
   WOOLLEY, Circuit Judge.

After a hearing at Ellis Island in New York Harbor the Department of Labor ordered that Palleschi be deported. Whereupon he surrendered himself to the Commissioner of Immigration at the Port of New York, resident at Ellis Island, and Bellardi, as his next friend, filed in the District Court of the United States for the District of New Jersey a petition for a writ of habeas corpus alleging that Palleschi (whom we shall call the relator) was unlawfully restrained of his liberty and praying that he be discharged. One of the judges of the District Court issued the Writ; the Commissioner of Immigration at the Port of New York, to whom it was addressed, obeyed it by producing the relator before the judge in New Jersey under circumstances to which we shall advert presently; the judge dismissed the writ and remanded the relator to the custody of the Commissioner. This appeal followed.

The one question properly here 'for review concerns the jurisdiction of the District Court of the United States for the District of New Jersey to entertain .the petition for a writ of habeas corpus, to issue the writ and discharge the alien. On this question the relator makes two contentions in the alternative, namely, that the District Court for the District of New Jersey (or any judge thereof) had jurisdiction to issue the writ and follow the case to the end, or, if it had not such jurisdiction and in consequence unlawfully issued the writ, the court nevertheless had power, on the actual production of the relator, to hear the ease and discharge him.

■ The first contention is predicated on the assertion that Ellis Island is in the District of New Jersey and therefore within the jurisdiction of the District Court for that district.

The island is property of the United States, ceded to the United States by the State of New York in 1808 and since 1891 used by the United States as an Immigration Station for the Port of New York. When it was property of New York it was within one or another of the counties of that state or within the waters thereof. With respect to federal jurisdiction over such counties and their waters, the United States by statute (28 USCA § 178, Judicial Code, § 97) prescribed the territorial limits of the Southern District of New York and the Eastern District of New York as embracing certain counties “with the waters thereof” and provided that the District Courts for the Southern and Eastern Districts “shall have concurrent jurisdiction over the waters within the counties of New York, Kings, Queens, Nassau, Richmond, and Suffolk. * * * ” This it would seem vested federal jurisdiction with respect to Ellis Island in the District Courts of the two named New York districts. But the relator, showing that by the Act of June 28, 1834 (4 Stat. 708) a boundary line between the states of New York and New Jersey had been run down the Hudson River to the sea, “submitted” that Ellis Island is on the westerly or New Jersey side of the harbor and therefore is in—or “not entirely” outside—the District of New Jersey and within at least “the concurrent jurisdiction of the District Court for the District of New Jersey and the District Courts for the Eastern and Southern Districts of New York.” Jurisdiction is determined by statute, not by geography. The statute expressly, and therefore exclusively, placed federal jurisdiction of Ellis Island in the District Courts of the two named New York districts. The running of a boundary line in 1834 through the waters dividing the states of New York and New Jersey cannot disturb the statutory designation of jurisdiction in 1910.

Therefore we hold that the judge of the District Court for the District of New Jersey had no power to issue the writ of habeas corpus prayed for in this case, to be executed outside of the territorial jurisdiction of his court. Ex parte Gouyet (D. C.) 175 Fed. 230, 233; Ex parte Yee Hick Ho (D. C.) 33 F.(2d) 360. The writ was unlawfully is- . sued.

But the relator, in aid of his contention that the District Court for the District of New Jersey had jurisdiction of this petition, relies upon the fact that the jurisdiction Of the Commissioner of Immigration at the Port of New York is not limited to New York but extends into the District of New Jersey as far as Princeton. The jurisdiction of the Commissioner of Immigration has no relation to and can in nowise affect the statutory territorial jurisdiction of the District Court for the District of New Jersey. That is an altogether different matter. If the Commissioner should do some" unlawful act within the District of New Jersey, the District Court for that district might have jurisdiction over him as it would have over any other person charged with federal wrongdoing in that district. But the Commissioner did not arrest the relator in New Jersey and confine him in that district; the relator surrendered himself to the Commissioner at Ellis Island and jhe Commissioner confined him in a New York district. So the transaction was wholly outside the District of New Jersey.

But the relator, doubtless anticipating this legal difficulty, made his second contention in the alternative, that, even so, the Commissioner in producing the relator in response to the mandate of the writ waived the question of jurisdiction of the District Court for the District of New Jersey to compel the presence of the relator and that, being actually produced, the court had jurisdiction over him notwithstanding the unlawful process.

. In support of this contention the relator relies on one federal and two state decisions, the latter of which are affected by state statutes.

In Simmons v. Georgia Iron & Coal Co., 117 Ga. 305, 43 S. E. 780, 61 L. R. A. 739, the Supreme Court of Georgia made the statement that the trial court had power on habeas corpus to inquire into the restraint of the relator when produced in response to a writ unlawfully issued. Yet the court based its judgment largely on the authority of the judge to issue the writ because the place and act of detention were within his territorial jurisdiction.

In Ex parte Mayen, 49 Cal. App. 531, 193 P. 813, the reviewing court in California, citing the Georgia case, made a similar statement of law in a somewhat like situation. But in the same opinion the court expressed its thought that the court below had jurisdiction to issue such a writ to any part of the state, thus raising a doubt as to the decisive force of its previous pronouncement.

In Ex parte Fong Yim (D. C.) 134 F. 938, it appears that two Chinese children had been denied admittance to the United States and had been detained in the Northern District of New York by the chief officer of the Chinese exclusion laws for the state of New York; A writ of habeas corpus was issued by the District Court for the Southern District of New York and its validity challenged for lack of jurisdiction. The court conceded that ordinarily it would have no jurisdiction to inquire by habeas corpus into the cause of the detention of the children in the Northern District yet, where the respondent officer, whose 'principal office was in the Southern District, admitted that he had the children in his custody and there was a stipulation entered into between counsel waiving their production in court, it held that such stipulation is an admission of the officer’s power and obligation under the writ to produce the children and justified further and complete consideration of the case. Ex parte Ng Quong Ming (D. C.) 135 F. 378, 379.

Without accepting or rejecting the law of -these eases, we think they are distinguishable from the ease at bar on the faets. Here a judge of the District Court for the District of New Jersey issued the writ of habeas corpus to be executed beyond the court’s territorial jurisdiction and therefore without authority. Not knowing just what to do, the Commissioner made a formal return of the writ, stating compliance with its mandate by producing the relator hut, at the same time, challenging the power of the court and the legality of the writ by saying:

“The (respondent) admits that .the relator is in the custody of the Commissioner of Immigration at Ellis Island, New York Harbor, which island is within the territorial jurisdiction of the United States District Court for the Southern District of New York and therefore this Court is without power or authority to issue a writ of habeas corpus in this case.”

Thus, at most, the Commissioner responded to the mandate of the writ qualifiedly, that is, he made a special appearance and a qualified production of the relator, neither of which acts could confer jurisdiction on the District Court or otherwise validate what theretofore was invalid. He was simply there with the man in his custody, openly resisting the authority of the court in the only way he could do it, unless he should hazard the consequences of disobedience.

We are of-opinion that the judge of the District Court for the District of New Jersey was, as he probably suspected, without power to issue the writ beyond the territorial jurisdiction of his court; and that, having unlawfully issued thé writ, the lack of jurisdiction, as evidently he decided, was not cured by the special appearance of the respondent and his qualified production of the relator.

The order dismissing the writ and remanding the relator is affirmed.


text:
    COHEN et al. v. UNITED STATES.
    No. 4474.
    Circuit Court of Appeals, Third Circuit.
    June 17, 1931.
    E. M. P. Pearse, of Newark, N. J., and George Wolf, of New York City, for appellants.
    Phillip Eorman, U. S. Atty., and Douglas M. Hicks, Sp. Asst. U. S. Atty., both of Trenton, N. J., for the United States.
    Before WOOLLEY, DAVIS, and THOMPSON, Circuit Judges.
   WOOLLEY, Circuit Judge.

The four appellants were tried and convicted on five counts of an indictment; one, under section 37 of the Criminal Code (18 USCA § 88), charging conspiracy to violate section 215 of the Criminal Code (18 USCA, § 338) and the other charging substantive offenses under the latter section. The assignments when compressed specify two errors; the first that the court erred in refusing to direct a verdict of acquittal because the government had failed to prove the conspiracy alleged in the first count and the schemes to defraud charged in the remaining counts. As no new questions of law are involved in this case we shall not state and discuss the evidence in this long record. We shall, instead, take the government’s own abstract of the first count, letter the several allegations and dispose of them alphabetically.

“Count I. Briefly, this count charges conspiracy to violate the provisions of section 215, U. S. Criminal Code (title 18, USCA § 338), in that the appellants together with others (a) planned to open a store in Trenton, New Jersey, under the name of “The Boston Store, Jacob Shopnick, Proprietor”, whereas in fact the name Jacob Shopnick was false and fictitious; (b) to issue false and fraudulent financial statements;* (c) to issue financial statements, showing certain assets on hand at date of statement, but with the understanding and intent to divide, distribute and return these assets among and to the conspirators so that same would not be available for use in the ordinary course of business; (d) to obtain credit and merchandise on the strength of these statements and to sell and distribute the merchandise and the proceeds of sales among the conspirators; (é) to secretly remove all assets so that persons or firms selling merchandise could not collect therefor; (f) to abscond from the City of Trenton so that creditors could bring no action to collect; and (g) to use the mails in sending out financial statements letters and other papers relating to The Boston Store.”

The overt acts as alleged were the procuring of a lease by Bumstone, a person not in the conspiracy, under a false name, the opening of a bank account by the same person under the same name, and the mailing of financial statements on different dates by Cohen, Chauls and Abraham Goldberg.

The same scheme set forth in the first count as the object of the conspiracy is charged as a substantive offense in each of the remaining four counts, differing only as to dates of mailing statements.

The offense defined by section 215 of the Criminal Code, discussed in Freeman v. United States (C. C. A.) 26 F.(2d) 748, consists of two elements; first, a scheme to defraud and, next, use of the mails to execute the scheme. Both must be proved before conviction can be had. To sustain a charge of conspiracy under section 37 of the Criminal Code to violate section 215 there must be evidence of an agreement or combination between the parties to accomplish by some concerted action the offense there defined with these same two elements. Therefore in considering any one or all of the five counts attention must be directed particularly to these elements in order to determine whether they have been proved or whether the court erred in its charge in respect to either of them.

Usually a scheme such as this one, devised or intended to be devised, is proved by evidence of its successful accomplishment. Here the scheme, if one existed, failed, and the fact of devising or intent to devise sueh a scheme to defraud by use of the mails must be proved by evidence other than that of its successful completion. This may be done, for success of the scheme is not necessary to the commission of the offense, but, as here, it is more difficult to prove and sometimes cannot be proved at all.

(a) The beginning of this matter was in appearance innocent enough. It consisted of an agreement between three of the appellants to embark in business in Trenton under the shopworn name “The Boston Store,” the money to be furnished by Cohen and Abraham Goldberg, and experience by Chauls. Frank Goldberg, Abraham’s nephew, merely trailed along and later was given the position of clerk. Abraham Goldberg refused to put up any money unless it should be handled and the business conducted by someone in whom he trusted. When Jacob Bumstone was selected for that purpose, Abraham Goldberg paid in $6,000 and Cohen $3,000. Cohen and Bumstone then went to Trenton, leased a store property, paid $100 rent in advance, deposited the remaining $8,900 in bank and began doing business, Bumstone, on a small salary, having charge of the financial end. All this was done by Bumstone under the assumed name of “Shopniek.” Frank Goldberg also acted under an assumed name. This, of course, had a sinister appearance. These acts, though very suspicious, were not however offenses in themselves and are pertinent only if they bear on subsequent acts.

(b) There was no evidence of an intent to issue false and fraudulent financial statements except the evidence of the statements themselves as they were later issued. The court found at the end of the trial that there was no evidence that these statements were false as to their financial data and so instructed the jury but that the statements were false in the matter of Burnstone’s signature under an assumed name and in saying “regular books” were kept. Whatever “regular books” may mean, the books kept were rather casual, but the counts did not charge falsity as to signature of statements or as to the kind of books kept. They charged falsity as to finances or money worth and there was no evidence to sustain those allegations.

(e) Nor was there evidence that the appellants when issuing the statements intended to distribute the money of the business among themselves to the exclusion of creditors. Later they did distribute and keep some of the money. Of this we shall speak presently.

(d) The next two allegations are important. They charge the familiar conspiracy to issue financial statements in order to obtain credit and, on obtaining goods through credit, to sell and distribute the goods and proceeds of sale among themselves; and

(e) secretly to remove all assets so that creditors could not collect. There was not here the usual evidence to support this no longer novel way of doing a fraudulent business. There was evidence that early in the transaction Cohen took away some merchandise but there was also evidence (of doubtful weight) to the effect that it was in whole or in part adjusted in the 'final transaction with. Abraham Goldberg. Cohen was siek— or said he was—and got out of the business about a month after it started and was paid back his $3,000 contribution before the financial statements were sent out. It might be that one had been sent out before he retired. Of this we cannot be certain. At any rate, that was the last of Cohen.

There was no evidence that Frank Goldberg participated in the conspiracy or in any one of the alleged substantive acts. He was a mere clerk and was convicted without .anything against him except the suspicion which inevitably arises against a man who is passing under a false name.

Chauls traveled a part of the time and generally attended to the merchandise part of the business.

Abraham Goldberg, an old man residing in New York, according to the testimony, never saw the store but, trusting his friend Burnstone, left everything in his hands. At the end Abraham Goldberg was paid back the $6,000 he contributed and Chauls received $350. So far as the record shows the debts were small, amounting to a few hundred dollars. These of course should have been paid before any distribution was made to Abraham Goldberg and Chauls, the remaining partners. But this distribution, as it appears on this record, though clearly dishonest, did not amount to the crimes alleged.

(f) Some of the appellants undoubtedly disappeared after the failure and in that sense may have absconded and made pursuit by creditors difficult. But that again was a fact after the alleged criminal event, which, though significant, was not an element of .the crime and did not supply proof of the essential element of a scheme which was lacking.

(g) Use of the mails will be discussed under the next question.

The appellants raise the second question by assigning error to the court in admitting evidence of the receipt of statements, letters and envelopes tending to prove (under the last four counts) that they were mailed by the defendants in execution of the alleged scheme.

This question arose on the government’s effort to prove that the defendants mailed the statements in execution of the alleged scheme —the second essential or jurisdictional element of the offense defined by section 215— and came up at the trial on the government’s tender of evidence that the alleged false statements were received in the mail under circumstances (proved or to be proved) that Chauls furnished Burnstone the figures as to stock on hand and Burnstone, acting for Cohen, Chauls and Abraham Goldberg, prepared and signed the statements and left them in the office at the place from which clerks usually posted the mail and that he saw and knew nothing of them afterward. The attorney for the defendants objected to this tender on the theory that evidence of the receipt of the statements through the mail can not, under our decision in Freeman v. United States (C. C. A.) 20 F.(2d) 748, 749, be admitted until after proof that the defendants had mailed them. There is nothing in the decision to that effect. The learned trial judge, having that decision before him and expressly intending to ignore it, misconceived it yet properly admitted the evidence (R 104), for, under the law of that case as reviewed in Berliner v. United States (C. C. A.) 41 F.(2d) 221, 222, the receipt of a false statement through the mail, while alone not evidence that the defendants mailed it, is very good evidence that it was posted in the mail—one phase of the federal offense—to be followed up by evidence that the defendants mailed it or caused it to be mailed, such evidence, whether direct or circumstantial, to be handled by the court later in the trial on appropriate motions or in its charge to the jury.

On the circumstantial evidence admitted in this case the jury might validly have found within the Freeman decision that the defendants or some one of them had or had not caused the statements to be mailed, yet when the learned trial judge came to instruct the jury on the element of the offense as to mailing he fell into error in not fully charging the law of the Freerdan and Berliner Cases, which is law in this circuit.

The judgment is reversed as to all appellants.


text:
    E. I. DU PONT DE NEMOURS & CO., Inc., v. HUGHES et al.
    No. 4376.
    Circuit Court of Appeals, Third Circuit.
    June 8, 1931.

      Geo. Wharton Pepper, and Thomas Stokes, both of Philadelphia, Pa., and C. M. Spargo, of Wilmington, Del., for appellant.
    Ulrie J. Mengert and Robert T. McCracken, both of Philadelphia, Pa., for appellees.
    Before BUFFINGTON, WOOLLEY, and DAYIS, Circuit Judges.
   WOOLLEY, Circuit Judge.

The plaintiffs had judgment on a directed verdict. The defendant appealed.

The plaintiffs sued to recover a balance they claim to be due for coal which Charles A. Hughes, their decedent, delivered and E. I. duPont deNemours & Company accepted and used under a government order during the war. The action is laid in assumpsit. As there was, admittedly, no express contract between the parties, the action must be in indebitatus assumpsit. The question is, What promise as to the price to be paid did the law raise on the part of the vendee?

The Congress, recognizing the exigencies of war, passed the Lever Act (40 Stat. 276, approved August 10, 1917) which among other things authorized the President generally to regulate production, prices and sales and particularly to requisition coal, and to fix the price of coal and regulate its distribution among dealers and consumers in order to prosecute the war effectively and without subjecting the government to unreasonable exactions. Thus the President, acting through the agency of the United States Fuel Administrator, had power absolutely to fix the price of coal between sellers and buyers and regulate its distribution and use. His administrative orders were a valid exercise of the power of the government at war, Highland v. Russell Car & Snow Plow Co., 279 U. S. 253, 49 S. Ct. 314, 73 L. Ed. 688, and had all the force and effect of statutes, McFadden v. Lineweaver & Co., 297 Pa. 278, 146 A. 901. 50 this case starts with the certainty that what the Fuel Administrator did in the name of the President had the force of law and, so far as it went, bound both parties.

The duPont Company was under heavy contracts with the government for munitions. Late in 1917, the exigencies of war becoming more and more acute, the government, through the War Department, called upon it to increase production. It had, on hand and under contract, enough coal to run its plants in carrying out its contracts, but to increase production beyond contractual engagements it required additional coal for steam purposes. At that time it was impossible to obtain coal otherwise than through the Fuel Administrator. Therefore the duPont Company reported to the Fuel Administration 'at Washington the government’s demand for increased production and its inability to respond for lack of steam coal with the result that the Fuel Administrator, on December 15, 1917, telegraphed Hughes, an owner and operator of a bituminous coal mine in Pennsylvania, as follows:

“You are hereby ordered and directed to ship entire output of your number two mine account DuPont Powder Company Wilmington Delaware this order to take preference over all obligations except your allotment account Army Transports. * * * Send shipping notices of all ears to this office also Wilmington Delaware.”

The Fuel Administrator confirmed this telegraphic order by a letter of even date in which he advised Hughes that the action he had taken was made absolutely necessary on account of increased fuel requirements of the duPont Company; that the Commission on Car Service had been requested and had agreed to place cars at his mine to take care of its full production; that the tonnage was to be sent under shipping directions from the Fuel Administrator’s office to the various du-Pont plants and that the order with one exception to'ok preference over all other obligations including railroad fuel. This plainly was a war transaction arising from a war emergency.

When the Fuel Administrator thus established the relation between Hughes and the duPont Company of seller and buyer of coal, nothing was said by anyone about the price. This, doubtless, was due to the recognition by everyone of the Fuel Administrator’s power to fix or agree to the price of coal and to the fact that each party thought he had' done so in a particular way.

Under the Fuel Administrator’s order Hughes began shipping to the duPont Company on January 9, 1918 and continued beyond February 14, 1918. All the coal produced from the Hughes mine was bituminous coal of a quality which rendered it useful not only for steam purposes but for smithing purposes. The price fixed by the Fuel Administrator for bituminous coal for steam purposes between the above dates was $2.45 a ton and the price for smithing coal, when sold with the permission of the Fuel Administrator for smithing purposes, was fixed by the market at $4.44 a ton. Reckoned from past experience in marketing coal for smith-ing purposes and steam purposes from the same mine, Hughes invoiced 63.6% of deliveries to the duPont Company as smith-ing coal at $4.50 a ton and 36.4% as steam coal at $2.45 a ton. The duPont Company paid for all the coal as steam coal at the current price fixed for bituminous coal and refused to pay more. In this it was supported by the Fuel Administrator. Hughes accepted what the company paid and demanded a balance at the higher price for smithing coal, hence this suit.

This difference of views as to price arose from the Fuel Administrator’s several orders in respect to smithing coal. These orders, manifestly, were based on a number of conflicting considerations arising out of the war, namely; a recognized adaptability of certain bituminous coal for both smithing and steam purposes and a recognized difference in its sale value when used for one purpose or the other; the government’s exigent war requirements; the requirements of the smithing trade not directly involved in prosecuting the war; and the Fuel Administrator’s own difficult task of serving the government at war with as little disturbance to peace time trades as possible. His orders were no doubt influenced by the further consideration that smithing coal, being as good for steam purposes as other bituminous coal, must be kept finder his control in order to maintain in proper balance coal distribution to peace and war time industries. In this difficult situation the Fuel Administrator, feeling his way, issued from time to time in the name of the President orders in respect to smithing coal of which that of October 6, 1917, the one here pertinent, read as follows: “Smithing and Garniel Goal.—Until further action of the Fuel Administrator, smithing coal, when used for smithing purposes only, may be sold at the market price prevailing at the time of sale.” (This order was annulled on February 14, 1918, by another order of that date requiring that all smithing coal be sold at the going government priee for prepared sizes of bituminous coal, which was raised to $3.05 a ton. Because of this last order the plaintiffs limit their demand for payment at the market price for smithing coal on deliveries to that date.)

The learned trial court, construing the order of October 6 and charging the jury for a directed verdict, stated that the seller was entitled to receive the market priee for smith-ing coal, and if the coal he sold was smithing coal, useful for smithing purposes, but used by. the buyer for steam purposes, it must, nevertheless, pay the smithing coal priee, inferring that otherwise the steam coal price for smithing coal sold would be unjust compensation.

We are constrained to take another view of the order on which both parties, though interpreting it differently, stand.

The Fuel Administrator was dealing with a commodity that, admittedly, had different uses, and different values according to the uses to which it was put. He had power (which later he exercised) to withdraw the priee preference which by two of his orders he had given smithing coal. Moreover he had power in the exigencies of war wholly to withdraw coal of this dual quality from the smithing trade and devote it entirely to war industries for steam purposes. And particularly it was within his powers—and it was his duty—to see that industries not essential to the war, and even industries essential to the war, should not rush in and bid up and buy up smithing coal for steam purposes to the disturbance of prices and coal distribution in his difficult scheme of stimulating war industries and keeping peace industries alive. Therefore, by the order in question, he decided that smithing coal “when used for smithing purposes only” might be sold on the market at the market price. This limitation as to use was in effect a holding that when not used for smithing purposes coal of this twofold character must not be sold at the market priee for smithing coal but at the priee fixed for coal used for its other purpose, that of steaming. We think the Fuel Administrator plainly made use of coal the test of the price. And this was wholly consistent with his problem of distribution.

However this order be interpreted it would, if obeyed, inevitably work a hardship on someone; on the vendee if it had to pay the higher smithing price for coal used only for steam purposes and on the vendor if he had to sell smithing coal at the low price of coal for steam purposes. And it is just here the plaintiffs maintain that in the latter event the order as we construe it would be unconstitutional because violative of the Fifth Amendment.

To decide whether “private property (was here) taken for public use, without just compensation” we must determine whether the property was taken, consider the compensation offered and inquire into the vendor’s right, had he felt aggrieved, to resist the order and protect himself.

It should be noted that this transaction of sale did not emanate from either party. Hughes did not approach the duPont Company and offer to sell it coal, nor did the duPont Company approach Hughes and offer to buy his coal. So far as the record shows neither ever heard of the other until they simultaneously received the Fuel Administrator’s order directing one to sell and the other to buy. Nor did they, thereafter, have any dealings in the matter. Both acted under the order without question and at once.

The order when accepted and obeyed created a contract between the parties for the sale and purchase of coal. Though silent in its written terms as to priee, the price had nevertheless been fixed” by the Fuel Administrator and entered into the contract. Highland v. Russell Car Co., 279 U. S. 261, 49 S. Ct. 314, 73 L. Ed. 688. The vendor could not recover for a quantum meruit on an implied assumpsit, for, as the action of the Fuel Administrator in fixing the priee had the force of law, the only promise as to price which the law would raise on the part of the vendee is a promise to pay the price which the law itself had determined. Even so, the price might be unjust; but the Congress, anticipating such a possibility, provided by section 25 of the Lever Act a method of fixing prices to avoid such an occurrence. (40 Stat. 276, 284). Whether the price of $2:.45 a ton conformed to that provision for just compensation is not important in view of the fact that the government had not requisitioned the coal and had done nothing more than order Hughes to sell it to the duPont Company impliedly at the price fixed for steam coal. This order was not mandatory upon Hughes for the Lever Act did two distinct things; it provided, first, that the government might requisition supplies, and, second, regulate contracts between parties for supplies. The first is a direct taking of private property for public use; the other is not a taking at all. The act did not require Hughes to sell his coal to the duPont Company on the Fuel Administrator’s order, Highland v. Russell Car Co., 279 U. S. 253, 260, 49 S. Ct. 314, 73 L. Ed. 688, but it did provide that he could sell his coal only as the Fuel Administrator should order and only at the price he should fix. Here was a dilemma in which Hughes found himself had he thought the price unfair. But to meet such a situation and to avoid the constitutional objection of unjust compensation the Lever Act gave Hughes a way out. He could have ignored the order and refused to make delivery to the duPont Company. He was free to keep his coal. Had he done this, however, he would have made it liable to requisition or his mine to be taken over by the government. Highland v. Russell Car Co., 279 U. S. 253, 262, 49 S. Ct. 314, 73 L. Ed. 688. When requisitioned, he could, under section 10 of the act, have accepted seventy-five per cent, of the price determined and sued the United States for the balance of his claim. United States v. New River Collieries Co. (C. C. A.) 276 F. 690, affirmed 262 U. S. 341, 43 S. Ct. 565, 67 L. Ed. 1014. Hughes did not avail himself of this remedy afforded by the act but, having entered into the contractual relation with the duPont Company indicated by the order and made deliveries under it, he must be regarded as having acquiesced in the order and agreed to all the terms of the resulting contract of sale including that of price which, on the uncontradieted proof of sale and use of the coal for steam purposes only, was the price fixed for coal of that quality.

The judgment of the District Court is reversed with direction that a new trial b8 awarded and that it be conducted conforma-bly with this opinion.


author: THOMPSON, Circuit Judge.

text:
    MARYLAND CASUALTY CO. v. NEW JERSEY SHIPBUILDING & DREDGING CO.
    No. 4430.
    Circuit Court of Appeals, Third Circuit.
    June 15, 1931.
    James D. Carpenter, Jr., and McDermott, Enright & Carpenter, all of Jersey City, N. J., for appellant.
    Reynier J. Wortendyke, Jr., and Auten-rieth, Gannon & Wortendyke, all of Jersey City, N. J., for appellee.
    Before BUFFINGTON, WOOLLEY, and THOMPSON, Circuit Judges.
   THOMPSON, Circuit Judge.

This is an appeal by the Maryland Casualty Company, hereinafter designated the Casualty Company, from a judgment recovered against it on a verdict for $15,000 as damages the New Jersey Shipbuilding & Dredging Company, hereinafter designated the Dredging Company, plaintiff in the court below, claimed to have sustained in loss of profits through the breach of an alleged contract with the Casualty Company for the performance of dredging work in Staten Island Sound.

The Casualty Company, appellant, was surety for the performance by the Seely Engineering Company of a contract with the United States for dredging and removing rock in Staten Island Sound. Upon default of the Seely Company in completion of .its contract, the Casualty Company became liable to the United States for completion or the cost of completion of the contract. It, therefore, sent out invitations to complete the work, one of which, in the following form, was sent to the Dredging Company:

“July 11, 1927. ,
“New Jersey Shipbuilding & Dredging Co.
“50 Broad Street,
“New York City.
“Gentlemen:
“The contract of the, Seely Engineering Company for the dredging and removal of rock in the New York and New Jersey Channels has been declared in default by the War Department.
“The War Department has called upon the Maryland Casualty Company, as surety on the bond of the Seely Engineering Company, to complete the Seely Engineering Company’s contract. Therefore, the Maryland Casualty Company is interested in bids for the completion of the Seely Engineering Company’s contract for the dredging and removal of rock in the New York and New Jersey Channels.
“The Maryland Casualty Company will receive bids for the completion of this contract at its office at 105 William Street, New York City, Room 603 on Thursday, July 14th, at 10:00 o’clock, and will award the contract for the completion of the Seely Engineering Company’s contract to the lowest responsible bidder; reserving however the right to reject any or all bids submitted.
“If you are interested, we would be glad to receive your bid on Thursday.
“Very truly yours,
“E. Kemp Catheart,
“Mgr. N. Y. Bonding Claim Division.”
On July 14, 1927,- the president of the Dredging Company, Charles D. Pullen, delivered to E. Kemp Catheart, manager of the New York Bonding Claim Division of the Casualty Company, at his office a bid in the following form:
“July 14,1927.
“Maryland Casualty Company,
“105 William Street,
“New York City,
“Gentlemen: Attention Mr. E. K. Cath-eart, Mgr.
“In accordance with your letter of the 11th instant:
“We will finish the contract named therein according to the specifications of the U. S. Government Engineers, Second District, New York, dated September 24th, 1925, for the price of Eighteen Dollars seventy-five cents, ($18.75) per cubic yard. We will.be prepared to start on the work in as short time as possible and prosecute it in our usual businesslike manner.
“Your letter speaks of this contract, as the contract of the Seely Engineering Company, Inc., and this is referred to by us as of the Engineers Specifications, dated September 24th, 1925.
“Very truly yours, Chas. D. Pullen
‘.‘Chas. D. Pullen, President,
“50 Broad Street.”

The plaintiff was the lowest bidder. The Casualty Company, under its contract with the United States, as surety for the Seely Company, had the right to elect to complete the work. On August 27,1927, it entered into a written contract with the Standard Dredging Company to do the work on its behalf. The Dredging Company thereupon brought suit for damages for loss of profits based upon the allegation that on July 14, 1927, prior to the opening and submission of its bid, the clause of the invitation to bid, reading “reserving however the right to reject any or all bids submitted,” had been waived by the Casualty Company; that, after waiver, on the same day, its bid had been accepted; and that thereupon a contract resulted between the Dredging Company and the Casualty Company for the completion of the Seely Engineering Company’s contract with the United States.

At the trial, Mr. Pullen, president of the Dredging Company, testified that he was present at the office of the Casualty Com-any on July 14, 1927, the date on which bids were to be received, and that the following conversation took place:

“Catheart said: ‘Well, now, you are here,’ he said, ‘I hope we will get somewhere.’ And he said, ‘I rather expect that we may have some one else.’
“I said, ‘Oh, we are not going to be alone.’
“He said, ‘No, I think not. I have sent out for papers, and I think we will get other bids. I have just heard over the telephone from P. Sanford Ross that they are not ready to bid at this time, but they would be ready a little later, after they can learn a little more about the contract.’ He said, ‘We have one phoned-in price.’
“And I said, ‘Wait a minute, Mr. Cath-eart,’ I said, ‘you cannot go along on phoning and waiting. Are we going to do this business this morning or are we not?’
“And he said, ‘Oh, yes, we will get through with it, but/ he said, ‘the Arundel Company has just phoned in, they are not going to be here.’
“ ‘Well/ I said, ‘Mr. Cathcart, before we go any further, and while we have the opportunity, let us discuss this letter of yours/ and I took from my pocket that letter. ‘Now/ I said, ‘you remember the conference in our office with Mr. Seely and the distinct understanding that my company would not under any circumstances make any bid for this work excepting that we knew that the lowest bidder at this opening was going to get the work. That cannot be done by telephoning. Anybody can change a telephone talk or a telephone price, and/ I said, ‘I should insist, first of all, that the understanding is that the lowest bidder gets the work.’
“He said: ‘Mr. Pullen, you needn’t worry about that at all.’ He said, ‘That is waived in a minute.’ ”

The witness further testified:

“Mr. Cathcart opened up my envelope and said, ‘New Jersey Shipbuilding & Dredging Company, $18.75. Mr. Pullen, I congratulate you/ he said, ‘I am glad you got the job, yours is the lowest bid.’
“Mr. Williams turned around to both of us and said, ‘Well, I rather expected, Pullen, that you would be a little lower. You are light there with your plant. You have no expense to move onto it, and I rather thought you would get it.’ And he said, ‘I bid you good morning, gentlemen.’
“Mr. Cathcart turned to me around the other side of his desk and said, ‘Mr. Pullen, now, I think your plant is just adapted to' this work, and I am glad you got it.’ And he said, ‘When will you be ready to go to work?’ I said, ‘We are ready today.’ He said, ‘You will hear from me tomorrow.’ We sat down and discussed it. I told him that I thought perhaps we were, and that we could move right over onto the area from where we were.”

There was further testimony by Mr. Pul-len as to waiver and acceptance of his bid to the same effect, and he was corroborated by his secretary, Miss Moss, who was with him.

The Casualty Company set up want of authority on the part of Mr. Cathcart to bind it, either by waiver of the right to re-jeet any or all bids, or by accepting any bid. Upon those grounds, inter alia, the attorney for the Casualty Company, at the conclusion of the plaintiff’s case, moved for a non-suit. The motion was denied and exception allowed.

Mr. Cathcart, upon the witness stand, denied that he had made any statement agreeing, on behalf of the Casualty Company, to waive the right to rejeet bids or that he had accepted the plaintiff’s bid, and denied that either act was within the scope of his authority.

The attorney for the defendant also excepted to the charge of the court, affirmed in accordance with the plaintiff’s fourth request, as follows: “If you find that Mr. Cath-cart withdrew or waived the right to rejeet any and all bids mentioned in his letter of invitation to bid, and that withdrawal or waiver took place before plaintiff’s bid was actually submitted, and that upon the submission of the bids, the bid of the plaintiff Was lowest, and that the plaintiff was ready and able to perform the work, then your verdict should be for the plaintiff in the amount of such damages as you find it sustained.”

The authority of Mr. Cathcart to bind the defendant in the matter in suit was an essential element of the plaintiff’s case. There was no evidence to show that the alleged agreements were within his authority. There was evidence that he was the manager of the New York Bonding Claim Division of the Casualty Company’s business. Before submitting the ease to the jury, however, it was incumbent upon the plaintiff to prove that he had authority either to waive the reserved right of the defendant to rejeet any or all bids to complete the defaulted contract of the obligor in the surety bond, or to accept a bid to bind the defendant as surety on that bond. While his title as manager of the Casualty Company’s Bonding Claim Division would, on its face, appear to give him authority to represent the defendant in connection with transactions concerning claims against its principal, based upon bonds on which it was surety, the authority to bind it by altering the terms of the invitation for bids, or by the awarding of contracts with outsiders, after breach of contract by its principal, is, in our view, entirely beyond the scope of authority in him indicated by the title of Manager of the defendant’s Bonding Claim Division. He might well, under that title, be invested with authority to issue surety bonds or to negotiate concerning claims upon bonds and determine whether the obligor, for which his company was surety, was in default. While he might be held to have authority to bind the Casualty Company in matters relating directly to its obligations upon its surety bonds, the matter at issue here was one which is not plainly nor by reasonable implication included within the scope of authority indicated by his title.

We conclude, therefore, that the court was in error, first, in refusing the defendant’s motion for a nonsuit; and, second, in charging the jury as set out in the plaintiff’s fourth request upon the assumption, without proof, that Mr. Catheart had authority to waive the right to reject bids or to enter into a contract for the Casualty Company with the plaintiff.

The decision of this case on the ground stated makes discussion of other questions raised unnecessary.

The judgment is reversed with venire de novo.


text:
    LEHIGH VALLEY R. CO. v. JONES.
    No. 4533.
    Circuit Court of Appeals, Third Circuit.
    June 12, 1931.
    Howard P. McIntyre and Collins & Cor-bin, all of Jersey City, N. J. (Edward A. Markley and Charles W. Broadhurst, both of Jersey City, N. J., of counsel), for appellant.
    Meaney & Lifland, of Jersey City, N. J. (Thomas P. Meaney, of Jersey City, N. J., of counsel; Louis Bort, of Jersey City, N. J., on the brief), for appellee.
    Before BUPPINGTON, WQOLLEY, and DAVIS, Circuit Judges.
   WOOLLEY, Circuit Judge.

Walter. O’Brien Jones, engineer on a boat operated by the Lehigh Valley Railroad Company, sustained an injury from which he died. His administratrix brought this suit for damages against the railroad company in a state court of New Jersey. The railroad company then filed a libel and petition in the District Court of the United States for the District of New Jersey seeking exoneration from liability and praying limitation of its liability under the federal statute in that regard. 46 USCA §§ 183, 188, Rev. St. §§ 4283, 4289. After valuation of the boat, stipulation with surety and order for a monition, the decedent’s adminis-tratrix appeared and moved to dismiss the libel and petition on the grounds:

(a) That the boat was not a “vessel” within the meaning of the act and

(b) that the boat was not at the time of the accident “on a voyage” within the meaning of the act.

The court, holding that she was such a vessel as the act contemplated but was not at the time of the accident engaged in a voyage, dismissed the libel and petition. The railroad company appealed from the court’s decision on its second finding. As the administratrix has not appealed or otherwise questioned the court’s first finding, we assume without deciding that the boat was a vessel within the meaning of the act as construed by the decisions. 46 USCA § 188, Rev. St. § 4289; The Sunbeam (C. C. A.) 195 F. 468; Eastern S. S. Corp. v. Great Lakes D. & D. Co. (C. C. A.) 256 F. 497, 500; In re P. Sanford Ross, Inc., (D. C.) 196 F. 921, reversed on another ground (C. C. A.) 204 F. 248; Patton-Tully Transp. Co. v. Turner (C. C. A.) 269 F. 334.

As this case turns on the word “voyage” and its meaning, we are concerned with voyage first as a fact and then as a legal incident to the right of limiting liability.

The boat in question, known as “Lehigh Valley Pump Boat No. 600,” was constructed somewhat like a barge, being sixty feet in length, twenty-two feet beam and seven feet deep. She carried a boiler and a centrifugal pump. Thus equipped she was used to pump water out of leaking and sinking boats and to extinguish marine fires in New York Harbor. The boat was, at the time of the accident, moored to a pier in the navigable waters of the Hudson River, whieh was the customary place for her to lie awaiting emergencies of the character she was designed to meet. Being without means of self-propulsion, she was, when called into service, towed to the suffering craft. Unless her movement about the harbor in this way should be considered a voyage, she was the kind of boat that was never intended to go on a voyage within the common meaning of that word. However that may be, the fact is she was in no sense on a voyage at the time of the accident and to this fact it is probable the learned trial judge applied 46 USCA § 184, whieh accords to freighters and cargo owners suffering loss on a “voyage” apportionment of the sum for whieh the owners may be liable.

In order to understand this provision of the aet, which is the only one that contains the word “voyage,” it should be construed not alone but in connection with its related provisions.

Section 183 of title 46, USCA (Rev. St. § 4283), the first provision of the limitation of liability statute pertinent to the matter in hand, provides that liability of an owner of a vessel for loss, damage, or any act or thing occasioned or incurred without his privity or knowledge shall not exceed the amount or value of his interest in the vessel and her pending freight.

This concession to vessel owners was made to promote shipbuilding and encourage the business of navigation, Evansville & B. G. P. Co. v. Chero Cola Co., 271 U. S. 19, 46 S. Ct. 379, 70 L. Ed. 805; and effectively to carry out this avowed purpose the courts have liberally construed the legislation. Providence & N. Y. S. S. Co. v. Hill Mfg. Co., 109 U. S. 578, 3 S. Ct. 379, 617, 27 L. Ed. 1038; The 84-H (C. C. A.) 296 F. 427. Thus section 183, which creates and confers the right to limit liability, is the controlling provision of the act and under it most limited liability proceedings arise and end. It should be noted that its terms are very general and that it contains no limitation to injuries or loss occasioned while a vessel is on a Voyage. Realizing that situations might arise whieh do> not fall even within the breadth of section 183 the Congress provided by section 184, 46 USCA (Rev. St. § 4284) that:

“Whenever any such embezzlement, loss, or destruction is suffered by several freighters or owners of goods, wares, merchandise, or any property whatever, on the same voyage, and the whole value of the vessel, and her freight for the voyage, is not sufficient to make compensation to each of them, they shall receive compensation from the owner of the vessel in proportion to their respective losses; and for that purpose the freighters and owners of the property, and the owner of the vessel, or any of them, may take the appropriate proceedings in any court, for the purpose of apportioning the sum for whieh the owner of the vessel may be liable among the parties entitled thereto.”

In section 184 the word “voyage” appears for the first time and of its presence the. claimant-appellee avails herself to defeat the petitioner’s claim to a limitation of liability accorded by section 183. But the provision deals particularly with a situation where loss has been suffered by several persons and by several persons of different classes including freighters or cargo owners whose rights arise from maritime contracts contemplating transportation and therefore a voyage. To protect claimants as well as vessel owners in such losses and particularly to avoid situations of contesting claimants for different losses suffered at different times or on different voyages such as those whieh arose in The Alpena (D. C.) 8 F. 280; The Pelotas (D. C.) 21 F.(2d) 236, the provision, sensibly if not necessarily, restricts the parties to those who have suffered losses “on the same voyage,” and when so restricted the provision prescribes a pro-rata distribution of the value of the vessel and her freight when not sufficient to pay all the sufferers, Butler v. Boston & Steamship Co., 130 U. S. 527, 550, 551, 9 S. Ct. 612, 32 L. Ed. 1017, or, as tersely stated in Monongahela River C. C. & C. Co. v. Hurst (C. C. A.) 200 F. 711, 713: “The effect of section 4284 (46 USCA § 184) is to provide a general average of loss in case the value of the vessel and freight is insufficient to make full compensation to all sustaining loss.”

In the case at bar we are concerned neither with the fact of a voyage, nor with the law respecting losses on a voyage under section. 184. We are concerned only with section 183 of the act which nowhere restricts the right of an owner to limit his liability to losses arising on a voyage but which generally, in given circumstances, accords him the right to limit his liability for losses purely maritime. I Benedict on Admiralty (5th Ed.) 474; In re Michigan S. S. Co. (D. C.) 133 F. 577, 579, reversed on another ground (C. C. A.) 144 F. 788; The Muriel (D. C.) 25 F.(2d) 505; In re P. Sanford Ross, Inc. (D. C.) 196 F. 921, reversed on another ground (C. C. A.) 204 F. 248; Patton-Tully Transp. Co. v. Turner (C. C. A.) 269 F. 334; Eastern S. S. Corp. v. Great Lakes D. & D. Co. (C. C. A.) 256 F. 497.

The order of the District Court is reversed, with direction that thp. libel and petition be re-instated and the case tried in accordance With this opinion.


author: HUTCHESON, Circuit Judge.

text:
    SUPER MAID COOK-WARE CORPORATION v. HAMIL et al.
    No. 6209.
    Circuit Court of Appeals, Fifth Circuit.
    June 22, 1931.
    Rehearing Denied July 30, 1931.
    Edwin C. Hollins, of New Orleans, La., and Samuel J. Andalman, of Chicago, 111., for appellant.
    A. N. Moursund, of San Antonio, Tex., and John P. Bullington, of Houston, Tex., for appellees.
    Before BRYAN, SIBLEY, and HUT-CHESON, Circuit Judges.
   HUTCHESON, Circuit Judge.

This appeal has for its object the reversal of the decree of the court below which refused to enforce by injunction two restrictive covenants, under one of which each defendant agreed that “he would not for a period of one year, immediately after the termination of this contract, either for himself or for any other person, firm or corporation, either directly or indirectly, sell or attempt to sell any aluminum cookware, or solicit the purchase of the same in any city or community in which he shall have operated under this agreement, and within a radius of one hundred miles of each such city or community,” and under the other that he would not, for the same period, enter into such business anywhere within the territorial limits of the United States.

We think it should be said that the case as presented here, and as finally presented in the court below, is a very different case from that which, upon a petition bristling with charges of fraud and conspiracy, of unfair competition and unfair trade, was first presented there. Upon those allegations plaintiff, of course, had a right to have his ease go to the jury, as none have a right by conspiracy to disrupt the business of another, and it is a recognized head of equity jurisdiction to relieve against unfair competition, unfair trade. Instead of standing by his case as thus presented, plaintiff, without repleading, rearranging, or realigning his facts, undertook in the lower court, by dismissal of all the causes of action but one, to excise and exclude from his pleadings all allegations of fact except those presenting the making of the contract with its restrictive covenants, the delivery to the employee defendants of trade lectures, selling talks, and supplies, the leaving of its employ by defendants, their entry contrary to the restrictive covenants upon the business of selling aluminum ware, and all questions except the one question of the right of plaintiff to enforce these covenants by injunctive decree.

The court below sustained defendants’ motion to dismiss this cause of action, and-this appeal followed.

Appellant contends that, since the contract by its 'terms is to be construed as an Illinois contract and in accordance with the laws of Illinois, not Texas decisions, but those of Illinois, should control upon the question of the enforceability of the covenants; appellees that, since the public policy of the state of Texas is involved, the views of the Texas courts must control.

While we agree with appellees in this position, Union Trust Co. v. Grossman, 245 U. S. 412, 38 S. Ct. 147, 62 L. Ed. 368; Davis v. Jointless Fire Brick Co. (C. C. A.) 300 F. 1, we find the distinction unimportant, for it is our view that neither under the laws of Texas, of Illinois, nor of any other state should a court of equity grant its decree to enforce these covenants.

Appellant by its prayer for injunctive relief prima facie puts itself in the position of seeking, by contract, to deprive appellees of the right to earn their livelihood. Equity places upon it the burden of showing that the contract was fair, the restrictive covenants reasonable, and that they have a real relation to, and are really necessary for, the protection of appellant in the business to which the covenants are an incident. Eor, fundamentally, in and of themselves these covenants are in restraint of trade, and unenforceable. It is a settled principle of law that no man may, per se, contract with another that that other will not follow a calling by which he may make his livelihood. It is only when they are incidental to some contract which is reasonable in its purpose and its terms, and it is necessary to the protection of the rights of the employer under such contract, that the validity of restrictive covenants will be recognized and enforced, and then only when they are themselves reasonable, no public interests are involved, and the restriction is limited to the very point of the necessity of protecting contract rights, to which the covenant is incidental. In short, it is never the covenant itself, but the covenant in relation to the facts of the situation or contract to which it is incidental, which may be valid.

Further, it is well settled that, while a court of equity will in proper cases issue its writ of injunction to enforce covenants of this kind, it will not do so unless" the whole matter -appears equitable; that is, unless it rests upon a contract which is fair in its terms, involves no imposition nor injustice, and the private interests of the employer in the subject-matter of the contract to which the restrictive covenant is incidental, requires in good faith for its protection the enforcement of the covenant. Hepworth Mfg. Co. v. Ryott [1920] 1 Ch. 1, 9 A. L. R. 1484; Samuel Stores v. Abrams, 9 A. L. R. 1450, note; Taylor Iron & Steel Co. v. Nichols, 73 N. J. Eq. 684, 69 A. 186, 24 L. R. A. (N. S.) 933, 133 Am. St. Rep. 753; Kinney v. Scarbrough Co., 138 Ga. 77, 74 S. E. 772, 40 L. R. A. (N. S.) 473; Herbert Morris, Ltd. v. Saxelby, 1 App. Cas. 688; Clark Paper & Mfg. Co. v. Stenacher, 236 N. Y. 312, 140 N. E. 708, 29 A. L. R. 1325; Club Aluminum Co. v. Young, 263 Mass. 223, 160 N. E. 804; Mentor Co. v. Brock, 147 Minn. 407, 180 N. W. 553, 20 A. L. R. 857; Southern Properties v. Carpenter (Tex. Civ. App.) 21 S.W. (2d) 372, 373.

Appellant, recognizing that this is the general rule, invokes and cites that line of eases involving the ice man and the laundry man, about whose recurrent visits a large and essential part of the life of the average household revolves, whose access to the households of and personal contacts and standing with their customers, because their activities are periodical and recurring, furnish really the substantial basis of the good will of such businesses, and are intimate to their very creation and maintenance. Cali v. National Linen Service Corp. (C. C. A.) 38 F.(2d) 35; Carpenter v. Southern Properties (Tex. Civ. App.) 299 S. W. 440; Jennings v. Shepherd Laundries Co. (Tex. Civ. App.) 276 S. W. 726; Colonial Laundries v. Henry, 48 R. I. 332, 138 A. 47, 54 A. L. R. 343; Empire Steam Laundry v. Lozier, 165 Cal. 95, 130 P. 1180, 44 L. R. A. (N. S.) 1159, Ann. Cas. 1914C, 628; Sherman v. Pfefferkorn, 241 Mass. 468, 135 N. E. 568.

Appellant seeks also to analogize this ease to and invoke precedents in cases where some secret process or information has been divulged, and it is being used contrary to the covenant, sueh as was the case of Pfeffer-korn, where the court, refusing to enjoin an employee from taking employment, enjoined him only from breaching that clause of his contract which forbade the disclosure of the names of his customers, holding that the decree which had enjoined him from taking employment was wrong because the clause of the contract which forbade that went too far. “The facts of each ease,” said the court “must decide the measure of relief in it.”

The point that it is unfair competition which equity enjoins, and, except in particular cases, not the mere taking of new employment is well illustrated in the two cases cited by appellant supra, Colonial Laundries v. Henry, 48 R. I. 332, 138 A. 47, 54 A. L. R. 343, and Empire Steam Laundry v. Lozier, 165 Cal. 95, 130 P. 1180, 44 L. R. A. (N. S.) 1159, Ann. Cas. 1914C, 628, where the injunction was against, not the taking of new employment, but the unfair solicitation of customers which the laundry drivers had gained access to or acquaintance with through their contract with plaintiff.

While the petition of appellant does contain many general allegations o’f secrets disclosed to, and good will lodged in the hands of, appellees, the facts as shown by the papers and documents attached to the bill make it perfectly clear that here no secrets of any kind were disclosed, no confidential information was furnished, no good will was lodged in the hands of the appellees, nor was any good will taken by them from appellant. The ease is merely one of a restrictive covenant, which, depending upon its own terms for' its ■validity, for it has no incidental relation to any contract right of appellants which its enforcement is necessary to protect, must, because of the general prohibition against such contracts, fall.

Besides, we think that, apart from any other consideration, the so-called contract, denominated in the document a “rental agreement,” in which the appellant is referred to as “Lessee” and the appellant as “Lessor,” is on its face so harsh, unjust, and unreasonable as to the appellants as that it presents nothing moving a court of equity to enforce the negative covenants which it contains.

Without guaranteeing to the defendants one day’s regular work, without the obligation of the appellant to employ them or pay them anything, upon a seductive promise of the disclosure of information upon which they may hope to build a profitable line of sales, the appellees are induced to sign a paper which, while it has the general appearance of a contract, but keeps the promise to the ear while it breaks it to the hope. Such a contract, wanting in mutuality, presenting no equitable considerations, a court of equity will not enforce. 9 A. L. R. 1478, note; Carroll v. Giles, 30 S. C. 412, 9 S. E. 422, 4 L. R. A. 154; Tolman v. Mulcahy, 119 App. Div. 42, 103 N. Y. S. 936; Iron Age Pub. Co. v. Western Union Tel. Co., 83 Ala. 498, 3 So. 449, 3 Am. St. Rep. 758; Kimberly v. Jennings, 58 Eng. Reprint, 621, 5 L. J. Ch. (N. S.) 115; Dockstader v. Reed, 121 App. Div. 846, 106 N. Y. S. 795; Gilbert v. Wilmer, 102 Misc. Rep. 388, 168 N. Y. S. 1043; Iron City Laundry Co. v. Leyton, 55 Pa. Super. Ct. 93; Carpenter v. Southern Properties (Tex. Civ. App.) 299 S. W. 440, 441.

The judgment of the court Below is affirmed.