author: SANBORN, District Judge.

text:
    MARK v. WESTLIN.
    District Court, D. Minnesota, Sixth Division.
    April 6, 1931.
    F. H. Peterson, of Moorhead, Minn., for plaintiff.
    C. G. Dosland, of Moorhead, Minn., for defendant.
   SANBORN, District Judge.

The pertinent facts are as follows:

The defendant is the receiver of the First and Moorhead National Bank, having been appointed to succeed B. C. Schram, who was first appointed by the Comptroller of the Currency after the bank was closed on December 22, 1928.

The plaintiff, on December 21, 1928, had on deposit in the bank $2,559.71. She then arranged with the assistant cashier of the bank to purchase for her $2,500 of Liberty bonds of the United States, and gave to him a withdrawal slip upon her savings account for $2,534.46, the amount which he estimated would pay for the bonds. He gave her a receipt reading as follows: “Received of Mrs. Ida Mark twenty-five hundred thirty four dollars, forty-six cents ($2534.46) for twenty-five hundred (2500) dollars in Fourth Liberty Loan Bonds to be registered in the name of Mrs. Ida Mark, Moorhead, Minnesota.” The withdrawal from her savings account was noted in her passbook, but was not charged against her account on the books of the bank. The bonds were ordered from the Federal Reserve Bank of Minneapolis, and the amount paid for them was to be charged by the Federal Reserve Bank against the account of the First & Moorhead Bank in the Reserve Bank. It was the intention of the assistant cashier to wait until he received notice of purchase of the bonds and the amount charged against the account of the First & • Moorhead Bank before putting through the charge against Mrs. Mark’s savings account on the books.

The First & Moorhead National Bank closed on the following day. The bonds, although purchased by the Federal Reserve Bank, as directed, were never delivered to or paid for by the Moorhead Bank, and were retained by the Reserve Bank. At the time it closed, the Moorhead Bank had on hand some $40,000 in cash. The plaintiff, believing herself to be a preferred creditor, asked for the allowance of her claim in full. The receiver refused to permit her to file a claim as a preferred creditor.

The question is whether, under the law, Mrs. Mark is entitled to have her claim paid in full before the other creditors of the bank may receive their pro rata share of its assets.

One difficulty which some courts have had in dealing with the question of recovery of funds misapplied by an insolvent bank arises out of a failure to take into consideration the fact that the Controversy is not between the claimant and the bank, but between the claimant and the other creditors with respect to a particular fund in the hands of the receiver.

In Larabee Flour Mills v. First Nat. Bank of Henryetta (C. C. A. 8th Circuit) 13 F. (2d) 330, 331, Judge Lewis says: “The real issue in each ease is between the preference claimant and general creditors of the bank. They will get less if the preference is allowed. Each claimant asserted an equity, that the assets taken over by the Comptroller are trust funds in which it is a preferred beneficiary, , It is difficult to explain or understand by what equitable right one who has not contributed to the creation of a fund should be given a. special and superior interest therein, though some of the state courts seem to so hold.”

Justice Bradley, in Frelinghuysen v. Nugent (C. C.) 36 F. 229, 239, used the following language: “Formerly the equitable right of following misapplied money or other property into the hands of the parties receiving it, depended upon the ability of identifying it; the equity attaching only to the very property misapplied. This right was first extended to the proceeds of the property, namely, to that which was procured in place of it by exchange, purchase, or sale. But if it became confused with other property of the same kind, so as not to be distinguishable, without any fault on the part of the possessor, the equity was lost. Finally, however, it has been held as the better doctrine that confusion does not destroy the equity entirely, but converts it into a charge upon the entire mass, giving to the party injured by the unlawful diversion a priority of right over -the other creditors of the possessor. This is as far as the rule has been carried.” This statement has been repeatedly approved by the courts of this circuit. See Metropolitan Nat. Bank v. Campbell, Com’n Co. (C. C.) 77 F. 705, 707; Beard v. Independent District of Pella City (C. C. A.) 88 F. 375, 377.

It is firmly settled by numerous decisions of the. courts of this and other circuits that, in order to establish a preferred claim, the claimant must show that the funds of the bank were actually augmented by the transaction under which he claims his right to priority.

In Empire State Surety Co. v. Carroll County (C. C. A.) 194 F. 593, 604, it was said: “It is indispensable to the maintenance by a cestui que trust of a claim to preferential payment by a receiver out of the proceeds of the estate of an insolvent that clear proof be made that the trust property or its proceeds went into a specific fund or into a specific identified piece of property which came to the hands of the receiver. * * * ” See, also, State Bank of Winfield v. Alva Security Bank (C. C. A.) 232 F. 847; Farmers’ Nat. Bank v. Pribble (C. C. A.) 15 F.(2d) 175; Larabee Flour Mills v. First Nat. Bank (C. C. A.) 13 F.(2d) 330; Mechanics & Metals Nat. Bank v. Buchanan (C. C. A.) 12 F.(2d) 891.

In.Beard v. Independent Dist. of Pella City, supra, this language was used (88 F. pages 379, 382):

“Unless it appears that the fund or estate coming into possession of the receiver has been augmented or benefited by the wrongful use of the trust fund, noi reason exists for giving the owner of the trust fund a preference over the general creditors. * * *
“And to assume (the position) of the owner of a trust fund, and as such to assert a preferential right to payment in full out of the cash fund eoming into the hands of the receiver, to the detriment of the general creditors, it [the claimant] ought to be held to satisfactory proof of the fact upon which the right to a preference rests, to wit, that the fund eoming into the receiver’s hands has been augmented and increased by the addition thereto of the trust money, not as a matter of inference, nor as a result of mere entries on books of account, but because the fund or property against which the preference is sought to be enforced has been in faet augmented or benefited by the addition thereto of the trust fund.”

In the ease last referred to, the claimant made, in substance, the same contentions which are made here. The court said (88 F. 381): “It is claimed in argument that the court must treat the ease just as though the treasurer of the school district had presented the cheek, had obtained the money thereon, and had then deposited the money in the bank as the money of the school district, but this was not in faet done; and as againlt the creditors, whose money in faet created the cash amount coming into the hands of the receiver, why should fiction be resorted to in order to sustain a preference on behalf of the school district to payment out of a fund not augmented in faet by any sum belonging to the district?”

It is claimed here by the plaintiff that the giving of the withdrawal slip to the assistant •cashier was the same as though she had drawn •out of the bank that much currency and had then delivered it to the assistant cashier for the purpose of purchasing the Liberty bonds. There is nothing which Mrs. Mark did which augmented the assets of the bank which came into the hands of the receiver. Its cash assets were contributed by others. Had the withdrawal slip never been drawn, and had no instructions been given for the purchase of the bonds, the result would have been the same so far as the receiver is concerned. The other creditors were in no way benefited by what Mrs. Mark did. The case is therefore clearly distinguishable from Bartholf v. Milett (C. C. A.) 22 F.(2d) 538.

Finding the facts and the law to be as I have herein stated, my conclusion is that the defendant is entitled to a decree dismissing the complaint, with costs. •


source: Caselaw Access Project

license: Public Domain

text:
    METROPOLITAN NAT. BANK OF MINNEAPOLIS v. NATIONAL SURETY CO.
    District Court, D. Minnesota, Fourth Division.
    April 6, 1931.
    Timerman & Vennum, of Minneapolis, Minn., for plaintiff.
    Doherty, Rumble, Bunn & Butler, of St. Paul, Minn., for defendant).
   SANBORN, District Judge.

At the close of the testimony, the plaintiff and the defendant each moved for a directed verdict, whereupon the court discharged the jury and took the case under advisement.

The facts are as follows: The plaintiff is a national bank; the defendant, a corporation organized under the laws of New York. On November 25, 1929, the plaintiff and the defendant entered into a contract referred to as a “Securities Bond, Standard Form No. 1 Revised.” This contract indemnified the plaintiff against losses sustained by reason of taking and applying as collateral any securities forged, counterfeited, raised or otherwise altered, or lost or stolen. The bond provided that the word “securities” should include warehouse receipts and bills of lading, except those covering motor vehicles. Between April 1, 1930, and June 1, 1930, the plaintiff discounted and became the owner and holder, for value, of seven drafts aggregating $11,816, drawn by the Judith Milling Company, of Lewistown, Mont., upon various drawees. Attached to these drafts were forms of bills of lading describing certain flour and containing the names of supposed consignees. The plaintiff had for several years prior to the payment of these drafts accepted similar drafts with bills of lading attached, drawn by the milling company. The plaintiff, in paying the seven drafts referred to, supposed that the papers attached to them were genuine bills of lading and that the flour described in the bills had been actually delivered to the carriers whose names appeared in print upon the forms. None of these bills were signed by the agent of the carrier named on the form, and the flour described therein was never delivered to the carrier. The form used in each instance was that of the uniform straight bill of lading prescribed by the Interstate Commerce Commission, and was complete in every respect, except that it did not contain the signature of the carrier’s agent, and the space for such signature was left blank. All of the drafts referred to were purchased by the plaintiff in good faith and without knowledge that the flour described therein had not been delivered to the carrier, and -without noticing that the forms were unsigned by the agent of the carrier. The Judith Milling Company, shortly after these drafts were purchased, went into bankruptcy, and the loss which the plaintiff has directly suffered through the purchase of these drafts exceeds the sum of $5,000, the maximum amount for which the defendant is liable under its bond.

The plaintiff contends that the unsigned bills of lading were counterfeits, and that it is therefore entitled to recover from the defendant. The defendant claims that, while the forms attached to the drafts were used for the purpose of defrauding the plaintiff, they were not counterfeits, and it therefore denies liability.

“A counterfeit is a likeness or resemblance intended to deceive and to be taken for that which is original and genuine.” 15 C. J. 357.

“The term ‘counterfeit’ both by its etymology and common intendment, signifies the fabrication of a false image or representation. In its broadest sense counterfeiting means the making of a copy without authority or right, and with a view to deceive or defraud by passing the copy as original or genuine. As thus defined counterfeiting includes forgery. But the term ‘counterfeiting* as used in this article and as ordinarily understood in law is applied to the making and uttering of false money, or the forging of bank notes which are the equivalent of money.” 7 R. C. L. 913.

An unsigned deed, mortgage, note, draft, cheek, warehouse receipt, bond, stock certificate, bill of lading, or other instrument, the validity of which, is dependent upon the signature of the person who makes or issues it, • is susceptible of use as an instrument of fraud, but is not a counterfeit. It is not a false image or resemblance. It actually purports to be nothing more than what it is, an invalid instrument, because unsigned. It does not of itself deceive any one. The person who uses it to defraud does the deceiving by representing it to be something other than it actually pretends to be. He represents that it is signed, when the instrument itself contradicts him.

By attaching the unissued bills of lading here involved to drafts and sending them to the bank, the Judith Milling Company represented them to be issued bills of lading. The bank relied upon the representations, and was defrauded. The contract here involved did not pretend to indemnify the bank from loss because of the acceptance of unsigned securities as valid.

I have found no ease directly in point, but see United States v. Williams (D. C.) 14 F. 550; United States v. Sprague (D. C.) 8 F. 828; Wiggains v. United States (C. C. A.) 214 F. 970.

Finding the facts and the law to be as above stated, it is ordered that a judgment of dismissal be entered in favor of the defendant, with costs.

The plaintiff is allowed an exception to the denial by the court of its motion for a directed verdict and for judgment in its favor made on the sole ground that the evidence will support no other conclusion.


author: NIELDS, District Judge.

text:
    ANGIER et al. v. ANACONDA WIRE & CABLE CO.
    No. 854.
    District Court, D. Delaware.
    April 6, 1931.

      See, also, 48 F.(2d) 614.
    William G. Mahaffy, of Wilmington, Del., and L. G. Miller (of Emery, Booth, Varney & Townsend), of Boston, Mass., for plaintiffs.
    Hugh M. Morris, of Wilmington, Del., and George P. Dike, of Boston, Mass., for defendant.
   NIELDS, District Judge.

Edward Angier and Angier Corporation have brought suit against Anaconda Wire & Cable Company. The bill alleges infringement of United States letters patent No. 1,282,167 for “Improvement in Packages,” and prays for an injunction and an accounting. One element of the defendant’s package alleged to embody the invention of the patent in suit is crepe paper. Rinkle-Krinkle Paper Company, a corporation of Massachusetts, relying on Equity Rule 37 (28 USCA § 723), has filed its petition alleging that it is the manufacturer of the crepe paper used by the defendant and has a contract with the defendant to save it harmless and to defend this suit, and praying that it be allowed to intervene herein as a party defendant, and file its “answer, cross-bill or whatever pleading it may be advised is expedient,” and that the plaintiffs be enjoined from commencing or prosecuting other or further suits against its customers. The form or substance of the pleading the petitioner desires to file is not attached to or submitted with its petition. In view of the conclusion hereinafter reached, this defect will, however, he disregarded.

The petitioner must show affirmatively that he has an interest in the litigation. “Interest,” as used in this rule, means a' legal interest. The contingency of being held liable under a contract to save the defendant harmless and defend this suit is not such an interest. While it may be true that an injunction against the defendant will deprive the petitioner of a customer for its crepe paper, it cannot be said to have any legal interest in the question whether the patent in suit is valid or invalid, or whether the defendant, in using the crepe paper purchased from the petitioner in putting upon the market defendant’s package, is guilty of infringing the patent in suit. Moxie Nerve Food Co. of New England v. Modox Co. (C. C.) 179 F. 415. The petitioner has, if any, only a commercial interest in this litigation, and even that interest is dependent upon the continuance of business relations between the petitioner and the defendant which, so far as this record shows, may be terminated at any time. All of the cases cited by the petitioner deal with intervention by a manufacturer of the alleged infringing article or device, except that of Stoehrer & Pratt Dodgem Corp. v. Glen Echo Park Co. (C. C. A.) 15 F.(2d) 558. That case has no application here, as it appears from the opinion that the intervention was with the “assent of the original litigants.” This petitioner, however, is not in the same position as the manufacturer and vendor of an alleged infringing device furnished by it to a defendant. In such eases courts have almost uniformly permitted the manufacturer to intervene and join with the defendant in the defense of a suit. Indeed, the petitioner here does not seek to come in as a manufacturer would. It seeks an opportunity in this suit, if permitted to intervene, to set up defenses and seek affirmative relief not available to the defendant. This it should not be’permitted to do. In Allington v. Shevlin-Hixon Co. (D. C.) 2 F.(2d) 747, 749, Judge Morris well said:

“To permit, over the objection of the plaintiffs, a person to intervene not pro interesse suo only but as a party defendant * * * and then to permit such intervening party defendant to set up against the plaintiffs a counterclaim for affirmative relief that is not available to the original defendant, and to which the original defendant is not entitled, would he conferring upon such third person broad rights, indeed, with respect to the litigation, and might be extending the rights of such third person beyond the point intended by Equity Rules 30 and 37 [28 USCA § 723].”

An order denying the prayer of and dismissing the petition may be submitted.


text:
    ANGIER et al. v. ANACONDA WIRE & CABLE CO.
    No. 854.
    District Court, D. Delaware.
    April 6, 1931.
    See, also, 48 F.(2d) 612.
    William G. Mahaffy, of Wilmington, Ill., and L. G. Miller (of Emery, Booth, Varney & Townsend), of Boston, Mass., for plaintiffs.
    Hugh M. Morris, of Wilmington, Del., and George P. Dike, of Boston, Mass., for defendant.
   NIELDS, District Judge.

Edward H. Angier, patentee and owner of United States letters patent No. 1,282,167 for “Improvement in Packages,” granted October 22,1918, and Angier Corporation, sole licensee, have filed their bill of complaint against Anaconda Wire & Cable Company, a corporation of Delaware, alleging infringement, and seeking the usual relief. The invention of the patent, as stated in the specification, “relates to packages and the pur.pose is to provide an article with a closely fitting and resistant inclosing covering,” and is more particularly designed for packaging torie or annular articles, such as automobile tire shoes, coils of wire, and eoils of garden hose.

The defendant has filed a motion to dismiss the bill of complaint. Of the three grounds stated, only the first need be considered, as the second and third are obviously untenable. The first ground is that on the facts stated in the bill and in the patent in suit the patent is void on its face for lack of patentable novelty and invention. The authority of the court to grant a motion to dismiss on this ground has been recognized by this court. Coca-Cola Co. v. Whistle Co. of America, 20 F.(2d) 261. The question for determination is whether it clearly appears from the drawings and specifications and claims of the patent that, resorting to common and general knowledge, the court may say that there is a want of novelty and invention in the patent and that it is so palpable that any competent evidence which might be offered in support of the patent would not show the fact to be otherwise. The defendant contends that it appears from the specification.that tire packages were old; that spiral wrapping with a strip was old; and that prior use of ordinary paper for wrapping tires was old; and, further, that the only difference between the patent in suit and the prior art is the use or substitution of crepe paper for plain paper, burlap, or other material which had been theretofore used as a wrap for annular or torie articles, and advances the proposition that the substitution of one old material for another old material is not invention if the new result claimed is attributable to well-known characteristics inherent in the material. But substitution of one material for another may and often has resulted in invention, depending, of course, on facts leading to or bringing about such substitution or the results obtained thereby. Walker on Patents (6th Ed.) § 66. Whether or not such substitution'of materials, assuming but not deciding, that that is all this patentee has done, resulted in invention, depends on questions of fact. The defendant seeks to draw an inference from the disclosure of the patent and the fact that crepe paper was old, that the new result claimed by the patentee; if any new result is obtained, is attributable, not to inventive genius in the selection or use of the substituted material, but to well-known characteristics inherent in crepe paper. But that is an inference upon which the plaintiffs are entitled to a trial upon the merits.

On this motion facts alleged in the bill are, of course, taken as admitted. It alleges that the package of the patent has been eon-tenuously since 1908 extensively used in packaging for storage and shipment annular and torie articles; that many millions of the patented packages have been made and used; that they are used, exclusive of all others, for coils of garden hose, and for 90 per cent, or more of individually "wrapped wire coils, and on many vehicle tires; that there has been public acquiescence in the validity of the patent; that the patented improvements have been generally used by many concerns operating under express lieense from the plaintiffs, the names of twenty-eight of such concerns, constituting a minority in nmnber, being set out in the bill. Further, paragraph 10, reads:

“The patented packages, while analogous to, are substantially different manufactures from those of the prior art and by utilizing in a new manner thitherto unrecognized properties o± the materials used give rise to new results and to new and added functions in packages, said packages being much more efficient and of greater durability than those theretofore known and serving to remedy defects of prior packages which those skilled in the art had for a long time prior to the invention vainly endeavored to obviate.”

If the allegations of the bill are sustained by competent evidence, invention may well be found, particularly in view of the recent decision of the Circuit Court of Appeals of this circuit m Allen Filter Co. v. Star Metal Mfg. Co., 40 F.(2d) 252. To sustain the motion would be to deprive the , ., , , plaintiffs of an opportunity to support the grant o± the patent. A denial ox it still leaves to the defendant full opportunity to raise all questions now raised and to rebut such evidence as may be offered by the plaintiffs.,

Even if the question was a doubtful one, the rule expressed by the Circuit Court of Appeals for the Second Circuit in Beer v. Wallbridge, 100 F. 465, 466, would be determinative of this motion. The court there said: “A patent carries with it a presumption of novelty, and the trained experts of the patent office have decided that what was done by the patentee arose to the dignity of • . • TTTi x.i *j. i • mi invention. ^ Whether it was an obvious thing or not is a question of fact; and if it should appear that upon the introduction of the patented article it commended itself to the public, and was accepted as supplying what had long been wanted, and obtained an extensive sale and use, these facts might be decisive.”

It appears from defendant’s brief and argument, though not of record, that this patent was before the District Court of the United States for the Northern District of Illinois, Eastern Division, in the suit of the present plaintiffs against Nehring Electrieai Works, and that there the alleged act 0f infringement consisted in wrapping coils 0£ udre with crepe paper. The District Court sustained defendant’s motion to dismiss the bill on the ground that the patent was void- on its face. 37 F.(2d) 953, affirmed (C. C. A.) 45 F.(2d) 354. I am satisfied from a reading of the opinions in that eaSe that the allegations of the bill before the Illinois court were different in material respects from the allegations of the bill before this court, and that the principle of comity urged by the defendant has no application to a decision of this motion,

The motion to dismiss must be denicd,


author: FIELDS, District Judge.

text:
    BREMNER et al. v. MASON CITY & C. L. R. CO.

    No. 867.
    District Court, D. Delaware.
    April 1, 1931.

      Clarence A. Southerland (of Ward & Gray), of Wilmington, Del., for all plaintiffs.
    Wm. P. Peter, of Chicago, Ill., for Chicago, R. I. & P. Ry. Co.
    M. L. Bluhm, of Chicago, Ill., for Chicago, M., St. P. & P. R. Co.
    Frank H. Towner, of Chicago, Ill., for Chicago Great Western R. Co.
    Nye F. Morehouse of Chicago, Ill., for Chicago & N. W. Ry. Co.
    C. W. Wright, of Minneapolis, Minn., for receiver of Minneapolis & St. L. R. Co.
    Robert H. Richards, of Wilmington, Del., Wm. E. Lamb and T. K. Humphrey, both of Chicago, Ill., and Earl Smith, of Mason City, Iowa, for defendant,
   FIELDS, District Judge.

This proceeding has been instituted by ,r H. Bremner, receiver of the Minneapolis &

St. Louis Railroad Company, Chicago & North Western Railway Company, Chicago Great Western Railroad Company, Chicago, Milwaukee, St. Paul & Pacific Railroad ComPaAy> sud Chicago, Rock Island & Pacific Railway Company, five trunk-line railroad companies, against Mason City & Clear Lake Railroad Company, a corporation of Dela.ware, engaged in operating a line about ten miles long of railway from Clear Lake, Iowa, to Mason City, Iowa, with about five miles of street railways in those two towns. The bill alle-?S tllat tbe Plaintif& °Perate lb?es °f rail" W m interstate commerce extending in and through the state of Iowa and adjoining states, with railway lines converging in the city of Mason City, Iowa, and for more than twenty years have maintained in the city of Mason City large terminals with side tracks, industry tracks, switch tracks, and railway faeilities suitabl convenient, and reasonably . , , . , adequate to serve, and have served, all the mdustnes m that territory, including the terntory known generally as the Brick & Tile Field of Mason City, Iowa, in which there are a number of brick and tile plants operated under the name of Mason City Brick & Tile Company. The bill further charges that the defendant company within the last sixty days has built certain extensions of its main lme into some of tbes,e bnek and tüe Plants> wlthoat havln& drst obtamed from the Interstate Commerce Commission a certificate that tbe Present or future convenience and necessity required such construction, and has dedared its purpose and intention of building like extension into all of such plants, and cause the plaintiffs to be excluded wholly or in part therefrom.

The matter is before the court on plaintiff’s motion for a preliminary injunction, and has been heard on verified bill of complaint, affidavits, and exhibits. The plaintiffs ask that the defendant be temporarily restrained from constructing, or attempting to construct, any other or further extension of its tracks, other than now constructed, into any of the brick and tile plants or other industries within the territory described in the bill of complaint as the Mason City Brick & Tile Field, unless and until they shall first have obtained from the Interstate Commerce Commission a certificate that the public convenience and necessity require the construetion and/or operation of such extension of the defendant’s Une of railway, as provided in the Interstate Commerce Act as amended; and from disconnecting, taking up, or-removof the tracks, lines of railway, or other property operated by plaintiffs or any of them; and that the court on final hearing make the injunction permanent.

The defendant attacks the right of the plaintiffs to maintain this suit, denies that it has constructed, or has any intention of construeting, an “extension” of its line of railway, and declares that it is merely constructing a “spur, industrial or side track”; and further that, even if it be found that the work being done and to be done amounts to an “extension of its Une of railway,” the defendant is a street, suburban, and interurban railway company not operated as a part of a general steam railroad system of transportation, and therefore is not required to obtain from the Interstate Commerce Commission a eertificate of public convenience and neeesSlty-

The plaintiffs rely on paragraphs (18) and (20) of section 1 of the Interstate Commeree Act, 49 USCA § 1 (18) and (20). The material provisions of paragraph (18) are:

“No carrier by railroad subject to this chapter shall undertake the extension of its line of railroad, * * *' or shall acquire or operate any Une of railroad, or extension thereof, * * * unless’and until there shall first have been obtained from the commission a certificate that the present or future publie convenience an.d necessity require or will require the construction, or operation, or construction and operation, of such additional or extended Une of railroad/ * * * ”

t- , ... aragraph (20) provides:

“Any construction, operation, or abandonment contrary to the provisions of
* * * paragraph (18) * _ may be enjoined by any court of competent jurisdiction at the suit of * * * any party in interest.”

The defendant, on the other hand, depends for its sufficient protection on paragraph (22) of section 1 of the same act (49 USCA § 1 (22), which provides:

«pbe authority of the commission conferre¿ by paragraphs (18) to (21), both inclusive? sban not extend to the construction * * * 0f sptlr, industrial, team, switch- or side tracks, located or to be located wholly within one State, or of street, suburban; or iuterurban electric railways, which are not operated as a part or parts of a general steam rajlroad system of transportaj-jon » '

The first derfenbe considered is tbat of aehes', ^aebe8 18 not, hke limitation, amer® laps? of ^ but 18 ?™perly f .qUef ^ °f ^ “equity of permitting a claim to be ®nforced bfaase °* f°me change m tbe condition or relations of the parties. PeirceSmith Converter Co. v. United Verde Copper Co. (D. C.) 293 F. 108. The defendant contends that the construction complained of was begun November 5, 1930, and that shortly after that time representatives of all five 0f the plaintiffs were notified of that fact, On the other hand, the general counsel of one of the plaintiff railroads wrote a letter to an attorney representing the defendánt railroad company on November 20, 1930, in which it was stated: “We entertain no doubt whatever but that the Interstate Commerce Commissien would hold your company subject to its jurisdiction in respect to the proposed extensions and would expect your Company to submit an application for a certificate of pubUe convenience and necessity before either eonstrueting or operating the additional track-age. * * * In our opinion your road cannot safely proceed without the certificate. , . .„ Tbe feeord do®s no* .disclose !?at’ *5 a“y’ r®?.Jy ™as “ad® to tins letter, defendant did not go to the Commission. ? 18 unnee®/sal’y to/ f “ detf to'th® evi’ dence ori.this point. I thmfc.the plaintiffs T'f nfMs m ™tmS-a ^re-bl® len/tb °f lme sf ybetber the defendant mt“ded í° apply to tte ^erstate Cornme3(ee ^or a certificate of eonVe“ence‘ ™e deíay “ b™g“g suit may and pTOperly. sbouId llmlt tbe extent «** the preliminary injunction sought, as, for instance, operation of lines constructed and in operation-at the time of bringing suit, such delay as has occurred in this case is not suffieient to bar plaintiffs’ right to all relief by way of preliminary injunction. Further, I am in full accord with the views expressed by the court in Lancaster v. Gulf, C. & S. F. Ry. Co. (D. C.) 298 F. 488, 490: “The very structure of the act shows that injunction Wdl he against the operation of the track, as wed as against its construction, so that it is not possible for any person to claim a right against injunction springing out of the delay m questioning the eonstnietion of a forbidden track, since operation over the track is forbidden equally with construction.” I think the facts do not sustain the defense of laelles-

The defendant also urges that the plaintiffs can have no relief in this suit, for the reason that it does not appear that any one of them is a “party in interest” within the provisions of paragraph (20), for the reason that no one of the plaintiffs has an absolute right to demand that the tile company ship its freight over the lines of a particular eompany, and, no individual plaintiff having any such right, collectively they can have no such •right; and, further, that the right of each of the plaintiffs to enter these premises and take any freight is, under a license with the tile company, terminable by either party after diie notice. It also asserts that the tüe company had the right to route its freight over any one or more of the lines of the plaintiffs serving its plant, or over the line of the defendant, and even suggests it may use none of those lines, but ship1 wholly by truck or othér means of transportation, if it saw fit. It may be true that thé defendant has certain legal rights in this connection, but it had not exercised such rights up to the time of the filing of the bill in this ease, and we are not dealing with a state of facts that might arise. These tile plants have been in operation for many years, and were directly served by the rail lines of the plaintiff railroad companies, various of the plaintiffs having rails to one or more of the plants, and in the aggregate all plants were served by the five plaintiff companies. It is fair to assume that such traffic will continue to be hauled either by the lines of the plaintiffs or the proposed line of the defendant: To the extent that such traffic is hauled by other than the lines of the plaintiffs, it will result in a corresponding loss of revenue to the plaintiffs. A railroad eompany with which a proposed extension by another company will come' in competition is a party in interest within the meaning of the act in question, and may maintain a suit to enjoin construction of such extension in, violation of the act. Detroit & M. Ry. Co. v. Boyne City, G. & A. R. Co. (D. C.) 286 F. 540. Any other conclusion would nullify this provision of the act.

While the raü Hneg of the defendant are situated wholly vithin the territorial iimits of the fltato o£ Iowa) it appears from the evi_ dence? and; in faet ig coneeded by tbe de_ £endan^ £ba£ ft handles interstate freight. It -g £berefore a common carrier engaged in interstate eommerce. Dahnke-Walker Co. v. Bondurant, 257 U. S. 282, 290, 42 S. Ct. 106, 66 L. Ed. 239; United States v. Union Stock Yard & Transit Co. of Chicago, 226 U. S. 286, 304, 33 S. Ct. 83, 57 L. Ed. 226.

This brings me to the two real questions involved in this controversy: First, whether or not the new tracks already constructed and proposed to be constructed by the defendant railway company are “extensions” of its line within the meaning of paragraphs (18) to (22) of section 1 of the Interstate Commerce Act, 49 USCA § 1 (18) to (22), or whether they are separate industrial, team, switching, or side tracks, within the meaning of that act; and, secondly, whether or not the defendant is a street, suburban, or interurban electric railway not operated as a part of a general steam railroad system of transportation.

These questions are not free from difficulty. While the first, whether the proposed new tracks of the defendant come within the provisions of paragraph (18), might be deeided on this record with some degree of satisfaetion, I think the second cannot. It inyolves questions of importance not only to the litigants, but, in view of the advance in the use of electricity to replace steam as motive power in connection with the operation 0f railway lines, to the railway industry in general. Moreover, the affidavits with reSpect to material points, both from the standpoint of the plaintiffs and defendant, are not satisfactory. At the argument, counsel for the defendant called attention to three eases before the Interstate Commerce Commission —the governmental body whose duty it is primarily to pass upon these questions — which he claimed dealt directly with the question of the meaning of the exemptions in paragraph (22), so far as they relate to interurban electrie railways being subject to the act, and holding that such railways were, under the facts of those eases, exempt from the operation of the act. At the same time counsel for the plaintiffs called attention to a like or greater number of cases before that Commission, arriving under the facts of those cases, at an opposite conclusion. Counsel went further, and conceded that they knew of no judicial interpretation of the words of this seetion. The importance of the questions involved and the necessity for a careful balaneing of the facts with the principles of law ap-plieable thereto lead me to the conclusion that it will be promotive of justice to postpone a decision on these points until final hearing, after full opportunity for the examination and cross-examination of witnesses.

Little need be said on the balance of convenienee. Various tracks of certain of the plaintiffs have been disconnected and damaged, and there are other tracks in respeet to which the same wrongful action is threatened, The revenue from traffic which will continue to move over the rails of the plaintiffs which are still in place, but which are threatened with removal, would be lost to the plaintiffs, even though the court should compel restoration of such connections on the entry of final decree. A preliminary injunction will have the effect of maintaining the status quo. A denial of - such injunction will result in immediate and unquestioned loss to the plaintiffs, whereas the defendant will not suffer any substantial loss by awaiting the outcome of this litigation upon final hearing, and its oss if any, is susceptible of indemnification by bond. The defendant was free to make application to the Interstate Commerce Commission for permission to build what has been called an extension and have the Commission pass upon the question whether such new eonstruction is in fact an extension of its line within the meaning of the act, and also whether as an interurban railway it came within the provisions of the act. The defendant has not seen fit to do so. Instead of so doing, it proceeded with the construction of the new tracks. The plaintiffs, however, had no right to initiate such a proceeding before the Commission.

The motion for a preliminary injunction will be granted.


author: GIBS0N District Judge.

text:
    BARRETT CO. v. SELDEN CO.
    No. 1781.
    District Court, W. D. Pennsylvania.
    Aug. 17, 1929.
    For former opinion, see 32 F.(2d) 360.
    See, also, 48 F.(2d) 620.
    R. T. M. McCready of Pittsburgh, Pa., and Pennie, Davis, Marvin & Edmonds, W. B. Morton, and R. B. Canfield, all of New York City, for plaintiff,
    Alter, Wright & Barron, George E. Alter and R. A. Norton, all of Pittsburgh, Pa., and Newell & Spencer, of New York City, for defendant.
   GIBS0N District Judge.

On February 27, 1929, this court fi ed an opmion, 32 F.(2d) 360, wherein Downs patent, No. 1,604,739', for an improvement ^ apparatus for promoting catalytic reaetions, was held to be valid and infringed by the defendant company. Subsequent to the filing of said opinion, counsel for the. defendant filed a petition for a rehearing. After notice to the plaintiff’s counsel, argumeat was had upon this petition wherein the matters set forth therein, as well as the issues of the ease, were discussed at eonsiderable length. Briefs were furnished by counsel for both parties,

The petition contains some eight assign-men£s of reasons for the rehearing sought,

Thé ^ reagon aggi d in substanee aR j t]lat tbe eollrt in its ini discloses & misllnderstanding of the construction and mode of operatioil of a Volhard petroleum £urnaee m operated by Henle, one of the antieipations of piaintiff>s patent claimed in defendant>s answer. Re-examination of the matter bas not satisñed the court that it fail-¿d to und6rstand the action of the Henle apparatus. The court, in describing the Vol-bard oven as used by Henle, mentioned an. iron tube surrounding the glass tube wherejn £be catalyst is contained. The defendant asserts that this iron tube was not an essential part of Henle’s operation of the Vol-bard oven. In the Henle publication refergnee was made to an Annalen article describing the Volhard apparatus. . This article, offered in connection with the Henle publieation, incorporates an iron tube in the Volhard apparatus. But whether the iron tube be included or not was immaterial in so far as concerned the point which the court was attemPting to make in respect to the Henle apparatus; that is, that no means were disclosed for the rapid transmission of heat from the catalyst to the kerosene bath.

The second reason assigned for a rehearing asserts that the conclusions reached in the opinion are based upon the state of the /TÍ9°\°f % ^ on the state of the art in the year 1919, when tbe sieged invention of the patent in suit was made. The allegation in respeet to the basis of the conclusions in the opinion is quite without foundation in fact, and it would seem, might easily have been discemed by an examination of the whole opinion instead of picking out a single sentence and disassociating it from the rest of the opinion. This sentence was as follows: “Not to continue the enumeration of points of difference, in our judgment no chemical engineer in 1909 (the approximate date of the Henle article), without the exercise of invention, would have been able to construct any commercial apparatus for highly exothermic catalytic reactions which was based upon the principles of the Downs converter.” In this language we possibly did not clearly set forth our idea. What we were endeavoring to assert was that no chemical engineer possessed of a knowledge of the state of the art prior to 1909 would have been able, by means of the information fur- • -l i i. j.i tt i , . , ni-snea by the Jdenie article, to have conJ ^ ai«<vc> wu. structed a converter based upon the principies of the Downs patent. If this language was unfortunate, it should have been clanfied, it seems to us, by the fact that the opinion discussed all other anticipations offered in evidence either as anticipations pleaded in the answer or as showing the state of the art at the time of the date of the alleged invention.

It is unnecessary to diseuss the remaining reasons set forth in the petition for a rehearing. They bring up nothing which was not fully argued and considered at the time the original opinion was filed. A reeonsideration of them — and we have endeavored to give them a careful reconsideration — has not brought any change in the conclusions first set forth.

The motion for a rehearing will be denied.


author: GIBSON, District Judge.

text:
    BARRETT CO. v. SELDEN CO.
    No. 1781.
    District Court, W. D. Pennsylvania.
    March 27, 1931.
    R. T. M. McCready, of Pittsburgh, Pa., and Pennie, Davis, Marvin & Edmonds, W. B. Morton, and R. B. Canfield, all of New York City, for plaintiff.
    Alter, Wright & Barron, George E. Alter, and R. A. Norton, all of Pittsburgh, Pa., and Newell & Spencer, of New York City, for defendant.
   GIBSON, District Judge.

On February 27, 1929, by opinion filed in this court, plaintiff’s patent was held to be valid and infringed. 32 F. (2d) 360. Upon motion for rehearing, the testimony was reviewed and given further consideration; the motion being denied. An opinion was filed with the order, which set forth the reasons therefor. 48 F.(2d) 619. The case was thereupon taken to the Circuit Court of Appeals, which, on July 11, 1930, affirmed the judgment. 47 F.(2d) 867. A petition for a rehearing was then filed in the Court of Appeals. On November 14, 1930, before decisión upon the motion, the appellant moved the Court of Appeals to remand the case to this court to consider alleged newly diseovered evidence. The Court of Appeals did not pass upon the motion, but made an order whieh permitted appellant to present a petition to this court wherein we are asked to request the Court of Appeals to remand the record to the trial court in order that the decree may be vacated and the cause reopened for the purpose of considering newly diseovered evidence. In due time both parties herein were heard in respect to the petition.

Upon hearing it developed that the newly discovered evidence of the appellant was the Belgian patent No. 147,959, dated February 15,1900, granted to Emile Raynaud and Leon Pierron,. for a new process for the manufacture of sulphuric acid. This patent came to file attention of counsel for the appellant a few days prior to the motion to remand in the Court of Appeals. Counsel had relied upon the fact that almost all Belgian patents are also found among those issued by France, Germany, and/or Great Britain. The patent under consideration was an exception to the rule, and counsel, who searched the patent lists of France, Germany, and Great Britain, but not that of Belgium dM not discover it pnor to trial and appeal. While the failure to examine the Belgian patent lists, and to produce the patent when the case was heard, was quite natural, and was one likely to occur even with the most careful and diligent counse , as has* it still must be admitted that counsel for the plaintiff below is correct in his assertion that the opposing party has not established ali the facts which should exist before the court would be justified in granting a new trial by reason of after-discovered evidence. However, we do not desire to base our decision-upon any question of laches, and have endeavored to carefully review the entire testimony of the ease in conjunction with the Belgian patent. '

The Belgian patent No. 147,959 is a process patent. It is termed by the patentees: “New Process of Manufacturing Sulphurie Aeid.” It contains no drawings of any apparatus designed to carry out the process, nor does it set forth a detailed description of any such apparatus. After stating that the apparatus proposed for use in carrying out the process was based upon the principle that a boiling liquid has a fixed temperature, the patentees described their apparatus as follows:

“The tube or other apparatus containing the catalytic bodies is surrounded by another tube or apparatus containing a liquid boiling at a fixed temperature. The heating takes place from the outside and may be produced by the passage of the gases which have to be cooled. The boiling may be more or less violent but the temperature remains fixed. * * *
“The tubes or- apparatus containing the bodies may be arranged in a methodical series as in the Hargreaves apparatus which readily permits the obtaining of variations of content of the bodies or the variations of temperature and if necessary the suppressing of 0I1e or more of the elements without interrupting the working.”

The Hargreaves apparatus, in the-form it appears in publications exhibited to us, shows a sef 0f ten cast-iron cylinders, each 18 feet jn diameter and 12% feet high, arranged in two rows of five cylinders each. The multiplication of cylinders was for the purpose of taking care of progressive steps in the manufacture of sulphuric acid by passing the reaction gases successively through each of the cylinders containing the catalysts, which, incidentally, vary in strength. Thus different degrees of heat are created by the reaction in eacb cylinder. As stated in the Belgian patenj;

«. • • This temperature (most favorable for tbe rea<3tion between S02 and 0), witMn certain limits (about 300 to 700° C.), ig ^ lower the more the body is eharged witb piatinum black or metals of the platinum £ot tbe same ous mixture, or, &r fte game eaM tic bod tbe less tbe are diMed and more nearly the fnTTnlli„ qq2J-0 ”

, , To accomplish the combination of sol-plmrous anhydride and oxygen, the Belgian patentees suggest, m conjunction with proposed means for maintaining a uniform temPerature, a cylinder which contains catalytic bodies of low platinum content near the point of admission of the gaseous mixture, and below these bodies in the cylinder other catalytic bodies of higher platinum content, and below the last catalyst other bodies of less platinum content. By this arrangement, patentees state:

“It then follows that a notable portion of fbe gaseous mixture, while it is rich, is transformed from the start by bodies of low confent an¿ as it becomes impoverished it encounters bodies whose greater content cornpietes the transformation; if the action has gone beyond the objective and a deeomposition of the sulphuric acid formed has taken place, ■ the recombination then operates in contact with bodies of lower content.”

It would doubtless be presumptuous on our part to express the opinion that the patentees’ 3 in 1 cylinder would be commercially inoperative, by reason of the impossibility of long preserving the exact relations necessary between the strength of the gaseous mixture and the strength of the catalysts, and the variations in heat of the reactions in the different parts of the cylinders, although such an opinion would have some justification in the fact that patentees’ suggestion has never advanced beyond the obscure paper patent .stage in so far as the manufacture of sulphurie acid is concerned. Whether or not our doubt in this respect is well founded, it is apparent that material differences exist in the process suggested by the Belgian patent and that contemplated by Downs. In the sulphurie aeid reaction, excess of heat at an early or middle stage of the reaction may cause a decomposition of the sulphuric acid, but the elements may recombine upon being brought in contact with a weaker eataiyst; but, in the phthalie anhydride reaction, the partial oxidation of a product, excess of heat ruins, and insufficient heat, if it does not absolutely destroy, results in an inferior produet. It will be noted that the problems of the respective patentees were not identical, but a still more material difference exists, The Belgian patent was for a process, while Downs’ patent was for a specific apparatus. It is true that the Belgian patentees have mentioned apparatus, supra, as suitable for their proposed reaction. No drawings of sueh apparatus have been made a part of the petition for the patent, and the description leaves much — too much, we think — to^ be imagined. It discloses the patentees’ 3 in 1 eylinder within another cylinder containing boiling paraffin or oil; the heating being “from the outside and may be produced by the passage of the gases which have to be cooled.” The patentees also possibly contemplated surrounding with the boiling liquid a series of cylinders each containing uniform eatalyst bodies but of different platinum content. With the Downs patent before us, it is not difficult to imagine the Belgian patent apparatus as a general application of the same means and principles used by Downs, We can attach the condenser, or even the means for varying the pressure upon the boiling liquid, to the proposed Belgian apparatas, although these features are unmen■'tioned in the patent; but getting no light from Downs, and considering the proposed apparatas in connection with the state of the art at the time, it must be agreed that the description is exceedingly vague. The patentees may have had a clear idea as to the meth°d hy which the surrounding fluid was to be heated by the passage of the hot gases' of the reaction, but they certainly have not disclosed it. When we consider the magnitude the apparatus in use at the time for the manufacture of sulphuric aeid, and the neeessary thickness of the walls of the catalyst cylinder, we know that Raynaud and Pierron did not contemplate the intimate heat relation between the reaction within the catalyst cylinder and the surrounding fluid which was 0Ile °f the main features of the Downs apparatas, with its attenuated tubes. As we-view the patent, it cannot be held to be an anticipation of Downs. It does propose to apply certain of the principles and means of' which Downs made use, but, as pointed out ™ our original opinion, the novelty disclosed by the Downs patent did not consist in any chemical discovery, but in specific apparatus-which used and applied old principles and well-known means in such a way as to attain new results and bring about an advance in the manufacture of phthalie anhydride, or in. the promotion of exothermic catalytic reaetions which could be successfully performed, onty within narrow limits of temperature,

Counsel for the defendant, in their able- and forcible presentation of their petition for the request to remand the cause, do not asserfc that the Raynaud and Pierron patent is-a complete anticipation of the Downs patent, They are willing, at least for purposes of' argument, to admit that the latter patent is-valid, but only to a very limited degree. They are willing to admit that the Belgian patent adds nothing to the record with respect totae claims which specify mercury as the liquid to be used, or to those claims which add' means to .change the boiling point of the liq-tad by regulating the pressure upon it.

The Downs apparatus was evolved for use in the manufacture of phthalie anhydride, an^- possibly its utility may be confined to-such manufacture, or to other exothermic reactions which occur at substantially the same-temperature. The surrounding liquid, if the apparatus is to be commercially effective,, must have in common with mercury the quality of being able to withstand long boiling without breaking up or suffering material deterioration, but we can see no reason for limiting thé patent to apparatus which uses mercury as the liquid part. It may be that many liquids exist which possess that neeessary quality. In our view of the Downs patent, although it combines many well-known chemical and physical principles, it is not to be put in the category of those patents which disclose some slight improvement upon a ba- ,, , ° ,, , , r, . sie patent, and consequently to be confined withm very narrow limits. If the only novelty in tbe Downs apparatus were tbe use of mercury as the bath, the patent would be invalid, because mercury had been so used, in different apparatus, prior to Downs. The same thing is true in respect to the means for varying the pressure upon the liquid bath. The mere addition of such means, or the use of such means plus mercury as the surrounding liquid, did not, in itself, eonstitute patentable novelty. Tbe apparatus as a whole was new and brought about a distinct advance in tbe phthalie anhydride art. Of that whole, however, the pressure means, although an advantageous element, was not an absolute essential to operation. It was used only when the catalyst deteriorated. In our opinion, the validity of the patent is not limited to those claims which specifically designate mercury as the liquid of the bath, and-set out means for varying the pressure; or, conversely, those claims are valid (as limited . ,, . ... . ... . , .» by the description) which do not specify mercury as the bath and do not include pressure means.

We have endeavored to examine and weigh the force of the Reynaud and Pierron Belgian patent with that degree of care de- . . .7.. n ,i manded by the force and ability of the eoun- , J°, . selo presenting it. That examination has not led ns to the conclusion that our original decisión would have been other than it was if that patent had been offered in the original trial. This being so, the petition of the defendant, praying- this court to seek the remand of the ease from the Circuit Court of Appeals, must be denied.


author: JAMES, District Judge..

text:
    In re BAY CITIES GUARANTY BUILDING-LOAN ASS’N.
    No. 16175.
    District Court, S. D. California, Central Division.
    April 9, 1931.

      Gold, Quittner & Kearsley, of Los Angeles, Cal., for petitioning creditors.
    David H Cannon, of Los Angeles, Cal., for alleged bankrupt.
   JAMES, District Judge..

The questions heretofore submitted , . . m , .. , , , , , ,, o decision, after hearing had, relate to the sux- « . « xi n ? ficieney of the alleged answer to the involuntary petition, as filed m the name of the alleged bankrupt. The petitioning creditors have moved to strike from the flies the alleged answer on the ground that it was not authorized to be made on the part of the alleged bankrupt. Counsel for the answering party has countered with the objection that the bankruptcy court has no jurisdiction of building and loan associations as organized under the California law, and with a showing that the board of directors, after the alleged answer was filed, regularly ratified the filing of the same. The questions briefly are:

(1) Is a building and loan association a bankmg corporation, and hence exempt from the jurisdiction of the bankruptcy court ?

(2) Did the action of the board of directors of the alleged bankrupt, taken subsequent to the filing of the alleged answer ratifying the filing of the same, give validity to the pleading1?

i8) thf answer^is to rzed should the court m the circumstances of the case allow an amendment to be made?

As to the matter of jurisdiction, the Eederal Bankruptcy Law as now in force (section 4, subd. (b), 11 USCA § 22 (b), provides that involuntary bankrupts may be:

“Any natural person, except a wage eamer or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company, and any moneyed, business, or commerical corporation, except a municipal, railroad, insurance, or banking corporation. * • *»

The Bankruptcy Act was amended in igio, and was extended to cover moneyed, business, or commercial corporations. Tfie provisions of the Bankruptcy Act creating exempt classes are strictly construed, and corporations claiming such exempt status must clearly come within the descriptions used. See Collier on Bankruptcy, vol. 1, p. 212.

determining characteristic of a banking institution is that it shall receive money or do posits, which it may use in the course of its banking business, but which it is bound to rePa7 to depositors. Building and loan associations are organized for the purpose of investing or loaning the money of its eertifieate or shareholders. The California Civil Code, § 633; provides ^ parfc.

. “That 110 such association shall, at any time, have or carry upon its books, for any * a . , member or investor, .any demand, commercial , , . 2 ,.i , , or checking account or any credit to be withdr£Wn the presentation of tia. ble eheck or draft»

. ^ xThe same section of that law provides ^at every building and loan corporation m setting forth the purposes for which, it is or|amz<?d in its articles shall state that it is ^ormed «^courage industry, frugality, borne building, and savings among its shareholders and members; the accumulation of sa™igs; the loaning to its shareholders and members of the moneys and funds so accurnulat®d¿ wlth the Profits «“d ™ngs thereon, and the repayment to each of his savings and pronts, whenever they have accumulated to fte M1 value of the sh or at anv time when be shall desire ^ same or when the eorporation shall desire to repay the game> as a may be provided in the by-laws;”

_ , , Bui!d^.iand ,loan sociations under the laws of Cahfomia are not under the supervision of the banking department of the state, ánd are excluded from regulations under the state Banking Act; they are not in-g ted b fte superintendent of banks; tbere^ ig a geparate supervising. offleial who examines into their business affairs and who checks improper or unsafe transactions and who may cause' them to be liquidated. The Circuit Court of Appeals for the Eighth Circuit, in the ease of Gamble v. Daniel, 39 F.(2d) 447, 450, had under consideration the question as to whether, under the law of Nebraska, a corporation, there described as the Peters Trust Company, was a banking corporation. What was said of the law there is applieable here; quoting from the opinion:

“When Congress spoke of ‘banking corporations’ it spoke as of 1910. It used the words in no technical nor special sense, but as they were then ordinarily understood. At that time, the ordinary conception of a bank was of a business which was based primarily upon the receipt of deposits (general or speeial), which deposits were used by the bank for loans, discounts, buying and selling commereial paper, and other business purposes, * * Other businesses might and did, and still do, deal in commercial paper, make loans or borrow money without any one thinking of them as banks. When a business takes deposits and then does the above or related things, every one knows it is a banking business. [Citing eases.] * * * In short, while there may be other attributes which a bank may possess, yet a necessary one is the receipt of deposits which it may use in its business.”

There are distinct differences between the charaeter of the business done by banking institutions properly so called and investment organizations, of which building and loan associations are a marked example. Remembering that business organizations, within the class excepted from the operation of the Bankrupty Act, must answer strictly to their deseriptive character, the conclusion is readily reached that the alleged bankrupt in this case does come within the Federal Bankruptcy Act and that it may be adjudicated a bankrupt. While the point as to jurisdiction appears not to have been made, federal courts in California have assumed jurisdiction in bankruptcy heretofore of building and loan associations. See Circuit Court of Appeals decisions, Ninth Circuit, in Wilson et al. v. Continental Building & Loan Association, 232 F. 824, and Merchants’ National Bank v. The Same, 232 F. 828.

The answer herein consisted of a bare denial that an act of bankruptcy had been committed and a denial of insolvency. It was purported to be verified by a director of defendant. The showing was made on the part of the petitioning creditors, and not denied by counsel for the alleged bankrupt, that the filing of the answer was not authorized at any regular meeting of the board of direetors, but that, at a date subsequent to the filing thereof, a meeting had been held, at which the resolution was passed assenting to and ratifying the action of the single director who made the verification. Passing the question which counsel for the petitioning creditors also makes that a director, as distinguished ^rom riie president and secretary of a corporate organization, may not make such a veriNation, it seems quite clear that, where an unauthorized answer was filed, which lacked official direction of the corporate organiza^I0n made through its regularly constituted ?®cers, sue-k a paper could not be given val-i^y by a subsequent ratification attempted k® niade by a board of directors. Being unauthorized when filed, it could not be given a better standing by approval made at a later directors meeting. ^ It follows that the objee^lori khe petitioning creditors to the answer *s taken, and that the answer should be stricken from the files,

Touching the question as to whethei leave should be given to the alleged bankrupt to file an amended answer at this time, the) rule relating to the amendments of pleadings may be adverted to. The same rule as relates to amendments to petitions instituting bankjaiptcy proceedings may be applied to the filanswers and amendments thereto, ru^e^hat such amendments will not be allowed unless it clearly appears that' the ends of justice will be promoted thereby, Collier on Bankruptcy, vol. 1, p. 661; Wilder v. Watts (D. C.) 138 F. 426; In re Earthing (D. C.) 202 F. 557. Where amend-menl; to verification was refused, In re Refund Cash Grocery (D. C.) 30 F.(2d) 158. considering the discretion to be used in allowing amendments, the courts have given i=reat consideration to the interests of credi^ors. There are many facts before the court which were referred to at the argument which convince me that it would not be to the inter- ^ of the great number of creditors and shareholders of the alleged bankrupt to further delay the making of an order of adjudieation herein. Prior to the commencement of tJle bankruptcy proceedings, officers of this building and loan association appeared before the court and urged that, on the petition of a creditor in an equity suit, a receiver should be appointed. At that time, the building and loan commissioner of the state of California, under authority given him by the state law, had decided that, after an examination of the books of the alleged bankrupt, it was his duty to take over the business and cause its liquidation. Because of the prospective action intended to be taken by tbe commissioner, a receiver was not appointed in tbe equity suit, and immediately thereafter tbe involuntary petition in bankruptcy Vi , , .-I-was filed. Since tbe fifing of that petition, a great number of creditors have intervened in support of the petition. A receiver in bankruptcy was appointed by this court, and he has been acting for a number of weeks. An intervention by a few creditors was made for the announced purpose of opposing the petition in bankruptcy, but this intervention was finally withdrawn. It appears that, with' the co-operation of the receiver, a creditors’ , , . 1 , committee has been organized, and it may v j? • i * _o t ,, f \ .. n be fairly inferred that a majority of the , . . j , shareholders and creditors favor an immemi -x- •• diate adjudication. The organization is in rm , i •. a sense co-operative. The pretended answer rj 11 •» / n t , n, t , , of the board of directors was filed at a date when the adjudication was almost due to be made. Considering the history of the case, the principal occurrences of which have just , A xixxi «x . been referred to, it seems that the interest of all of the persons principally concerned m obtaining satisfaction, or so mueh thereof as may result, of their claims for money invested, will be best served by bringing the matter to a close and allowing adjudication to be made. It is possible that there may be liability claims against the directors, as to which no definite opinionis intended to be expressed, and which would afford reason why those qffleers should, as against the interest of the general creditors, want to delay liquidation through the bankruptcy court. 6

. ... The answer to the involuntary petition is ordered to be stricken from the files. The clerk is directed to enter forthwith an order adjudicating the association a bankrupt, with the usual reference to a referee.


author: WESTENHAVEK, District Judge.

text:
    UNITED STATES v. STEIN.
    No. 513.
    District Court, N. D. Ohio, E. D.
    July 13, 1921.

      E. SWertz, Atty., Cleveland, Ohio, for plaintiff.
    E. H. Moore, of Cleveland, Ohio, and I. G. Mathews, of Youngstown, Ohio, for defendant.
   WESTENHAVEK, District Judge.

The bill in this ease is, in substance, one to quiet plaintiff’s title against adverse claims of the defendant, and more particularly, to enjoin the defendant from repeated acts of malicious trespass and interference with plaintiff’s possession and with its employees and its tenants thereon. Defendant, notwithstanding the general denial of its answer, did not, on this hearing, dispute the allegations of interference and trespass, but, on the contrary, announced its purpose to continue the same in the event the preliminary injunction heretofore granted was dissolved. No point was made on the hearing or is made in the brief of the defendant, going to the jurisdietion of this court. Both parties have argued and presented to the court the single question of the superior title of the plaintiff to the property described in the bill and the superior right to possession thereof. _ This question alone will therefore be considered and decided.

Plaintiff’s title depends on certain proeeedings said to have been taken under an Aet of Congress approved May 16,1918, entitled, “An Act to authorize the President to provide housing for war needs.” 40 Stat. 550. This act, among other things, authorizes the President of the United States, in order to provide housing for industrial workers engaged in industries connected with and essential to the national defense, to purchase, lease, requisition, or acquire by eondemnation or by gift, any improved or unimproved land, or any right, title, or interest therein on which such houses, buildings, improvements, and parts thereof have been or may be constructed. The only litigation on this power of purchase or requisition now material to be considered is that no occupied dwelling or place of abode shall be acquired except by contract, unless the necessity therefor shall first be determined by a judge of ^ Cireuit ?r Court °£ the Uni;ted States exercising jurisdiction in the locality where the land is situated. Power is also given to construct such houses and buildings as the President may determine to be necessary for the proper conduct of the existing war. He is also authorized and required to make just compensation therefor, to be determined by him. If the amount of the compensation thus determined is unsatisfactory to the perSQn entitled to reeeive the samej sueh person shall be paid 75 per cent, of the amount so determined and shall be entitled to sue the United States to recover such further sum as added to the 75 p.er cent, will make up such amount as will be just compensation therefor. This suit may be brought and eon-ducted as is provided by section 24, par. 20, and section 145 of the Judicial Code, 28 USCA §§ 41(20), 250. An appropriation of $60,000,000 is made by the act to enable the President to make just compensation to persons whose land is thus acquired, requisitioned, or condemned. Section 5 provides, in substance, that the power and authority granted by the act shall cease with the termination of the present war, except that the power and authority to care for, sell, or rent such property, as remained undisposed of, shall continue thereafter, and that all such property shall be sold as soon after the conclusion of the war as it can advantageously be done. It is further provided that, before any sales are consummated, the same must be authorized by Congress,

The President, by another act, approved june 4; 1918 (40 Stat. 595) is authorized, if }¿s judgment such action is deemed neeessary or advantageous, to create a eorporation for the purpose of carrying out the provisions of the act first cited. It was under this act that the United States Housing Corporation was created. The President is also by both acts authorized to exercise all powers of discretion granted him through any agency or agencies he may create or designate. Several later acts were passed making supplementary and additional appropriations and finally authorizing the sale or disposition of property thus acquired and of houses thus constructed. No question is made that ample funds were not appropriated and at all times available to provide compensation. Later, on June 18,1918,-the President designated by executive order the Secretary of Labor as an agency through whom purchases and requisitions of such property might be made.

On August 9, 1918, the defendant entered into a contract in writing with the United States Housing Corporation acting by authority of the President and the Secretary of Labor, for the sale and conveyance of the real estate now in dispute. The eon-tract of purchase included a two-story building, but otherwise no property was included which might not be requisitioned without condemnation, pursuant to the provisions of the first act. The defendant agreed to convey a good marketable title, free and clear of all ■ incumbrances, and including dower and homestead rights, and with the usual full covenants and warranties; also that he would furnish within five days an abstract of title showing a good marketable title thereto. This ■abstract was never furnished, and no deed was ever tendered '

j On September 11, 1918, the defendant conveyed to his wife and to his son, Russel Stem, an interest m this property. He and his grantees have ever since refused to perform the original contract of sale. _ The United States Housing Corporation immediately after the execution of the contract of sale, prepared Plans for the improvement of the real estate by allottmg, laying out, and grad-mg the same and constructing buildings thereon and at some date shortly subsequent to the 11th of September, 1918, entered into the possession thereof and proceeded to make such improvements, and m fact constructed thereon some forty-eight houses. No eontention is made that defendant’s wife and son were purchasers for value without notice of the outstanding contract of sale.

Owing to defendant’s refusal to perform his contract of sale, plaintiff, through the Secretary of Labor, resorted to the powers of requisition referred to in the acts above cited. The order of requisition was made March 20, 1919. It omitted that part of the land eontaining the dwelling house, which could not be acquired except upon condemnation. Notice of this requisition was served on the defendant and his wife in person March 28, 1919, and on his son by leaving a true copy thereof with the defendant, the same being alleged to be the son’s usual place of abode. Notice of the requisition was also posted on the premises, and filed for record in the county in which the land is situated, March 29, 1919. No point was made at the hearing ■or is now made in argument respecting the technical regularity of the requisition pro■ceedings. Later, compensation in the sum of $8,524.25 was fixed by the Secretary of Labor, and notice given defendant thereof, with further advices that, if dissatisfied with the amount, he might accept 75 per cent, without prejudice to his right to recover just eompensation in the manner provided in said act. Later the defendant, his wife, and son, filed claims with the Secretary of Labor seeking a largely increased amount of eompensation, which was denied, but have never resorted to the remedies provided in the act to recover additional compensation,

Upon the foregoing state of fact, I am of opmion that plamtiff has title to the premises described m its bill, and that its right to P°f f31°n “ suPflor the °£ df3^nt ?r a£,h“J?^e T son; T1“ States is undoubtedly the real 3t/nd tion, notwithstanding the United States Houslng Corporation, as a federal agency created for convenience in administering the law, mi M als0 haye been a b plain-m Defendant’s main proposition seems to be tbat tbe war bad terminated before tbe ert was requisitioned, and therefore ^ r to re quisition bad also been end_ ed ag & result o£ tbe isions o£ gection 5 o£ £be ori inal aet This proposition cannoj. be sustained. Tbe W£u, bad not terminated at tbe time fte p 6rty was requisitioned, gee Hamilton v. Kentucky Distilleries & Warehouse Co., 251 U. S. 146 40 S. Ct. 106, 64 L. Ed. m Tbe boldi o£ tMg eage hag been repeatedl reafarmed in later eases by ^ g me Court and in£erior £ederal colu4s

No attack was made at the hearing or in defendant’s brief upon the eonstitutionality °£ War Housing Act of May 16,1918. I* is sufficient, therefore, to say that in my opinion it is well within the powers conferred by the Constitution upon Congress, and that none of its provisions violate any elause o£ tlle Constitution. It is well-settled law that, the use being public, the necessity for the requisitioning, or condemning of propel’ty is n°t to be controlled by the courts, and that the judgment and discretion of the Legislature or of the other agencies, to which power is delegated to determine the necessity £°r taking any given property, cannot be controlled or reviewed by the courts. It is further settled law that, in requisitioning or condemning property for this kind of pub-lie use, it is not necessary that compensation should be paid in advance, but it is settled law that, if reasonable provision is made in the law whereby the property owner may be compensated, all legal requirements will be deemed to have been met and the rights of the property owner duly safeguarded. For authorities, see U. S. v. Forbes (D. C.) 259 F. 585; In re Military Training Camp (D. C.) 260 F. 986; U. S. v. O’Neill (D. C.) 198 F. 677; Crozier v. Fried Krupp Aktiengesellsehaft, 224 U. S. 306, 32 S. Ct. 488, 56 L. Ed. 771; Bragg v. Weaver, 251 U. S. 57, 40 S. Ct. 62, 64 L. Ed. 135.

. , , A. decree may be entered finding the issues m tavor of plaintin, quieting its title against defendant’s adverse claim of title thereto and enjoining him from further trespass and interference as prayed.


author: SOPER, District Judge.

text:
    THE HELEN BARNET GRING.
    No. 1707.
    District Court, D. Maryland.
    Jan. 6, 1931.
    George Forbes and Henry L. Wortehe, both of Baltimore, Md for libelant.
    Niles, Barton, Morrow & Yost, of Baltimore, Md., for respondent,
   SOPER, District Judge.

This libel against the schooner Helen Bar-net Gring is based upon a claim for cargo damage. The schooner is a vessel 202 feet in length by 40 feet beam, and was engaged to carry some 1,800 tons of fertilizer from Baltimore to Searsport, Me. The contract was covered by a general charter party for sailing vessels, under which the Gring was tendered to the Davison Chemical Company, the libelant, in the early part of February, 1929. She docked on February 12th at Baltimore, yras loaded during the 13th, 14th, and 15th, issued a bill of lading for the cargo on the l^th, sailed on the 17th, and arrived at her destination on or about Mareh 9th. When she reached Searsport it was discovered that ^bere was damage to her cargo, which has not been described in detail in the evidence, but ls estimated to have affected from 5 to 10 per cent, of the goods. The top of the cargo was dry, but in the lower hold the bags of fertili«F. ^ere- ™\toJ bei^ of four or five feet, ^“reached the fourth tier of bags. There was also a comparatively small damage affecting only 100 or 150 bags which were stored on the starboard side of the ship in the ^veen-decks.

There 310 two general theories advanced by tlle respective parties as to the causes of the damage. The libelant claims that the ship was leaky and unseaworthy, and that her ™rs fail®d to e™e that degree of due dlllgenee undCT charter party, they were re(3ulred to USe m °rder to relleve tW selves of liability for damages arising from a defective ship. The libelant says that by reason of certain defective seams and leaks • ,, , „ „ ,, , , , , , m tbe bul1 of the ,vess01 she took water m§> Y07a^e'j "witli the consequent damage te her cargo. On the other hand, the ship owner and claimant of the vessel contends that the vessel was seaworthy in every partieular, but that on this particular voyage she met with particularly heavy weather, high winds, and rough seas, whereby she took only that amount of water which every wooden vessel must take at sea, and that in the rolling and straining of the vessel in the heavy seas, caused by high winds, she blew her bilges; that is to say, the water in her bilges was forced up, due to the rolling of the ship, through the crevices in the ceiling of the ship, and came thence in contact with the cargo.

The court is' convinced that, whatever may be said in regard to the tendency of a ship of this sort to blow her bilges and injure her cargo in heavy weather, the preponderanee of the evidence shows that the ship was not seaworthy when she sailed. A number of circumstances contribute to this eonelusion. The vessel had laid at Newport News or Norfolk idle for some six weeks before the voyage in question. She was surveyed by Surveyor Leach on February 8, 1929. His testimony shows that to some extent, certainly so far as the interior of the vessel is eoneemed, he accepted the statements of the mate or engineer as to her condition, but he personally examined the hull of the ship, acting for the Boston Insurance Company. He wired that company on February 8th after his survey that the firing was satisfactory, but her seams must be searched between the light and load lines before loading, and that her owners should attend to this matter. His more formal survey report, of the same date, shows that the condition of the vessel was good in other respects, but under the heading of “Caulking” states that the seams and butts between the light load and the load line in places showed that the cement was broken and the oakum soft; that this condition was not serious, but was one which the owners should attend to before loading the next cargo. He reported that the deck and top side seams were in good condition. Notwithstanding this warning from the surveyor, which was communicated verbally to the captain of the ship, no searching of the seams was made and no caulking was done. When the ship got to Searsport and the damage to the cargo was discovered, she was visited by a representative of the shipper and also by a representative of the consignee. . Their testimony shows that the hold of the vessel was wet, that it was stained with the cargo to a height of four or five feet, and also that there was some damage to the cargo stowed in the ’tween-deeks on the starboard side. Their • testimony also shows that the captain complained that he had had no time to caulk the vessel before she sailed, and that he said he had not been able to secure a certificate of seaworthiness. He also stated that there was a defective steam pipe beneath the main deck underneath which the damaged cargo in the ’tween-deeks was found,

A further examination of the ship was" made as to her seams by the surveyor Stein 0n April 3d, after the vessel had returned to Baltimore with a portion of the damaged goods. He found that the seams between the %]•Ioad “d the deck were in bad f ape, and_ that they required caulking be-f™® ,the Jf** f twenty-one P , m ^at Part hull; he found the wood “ tm?era of tbe bold ^’e water-logged; ^at the steam ppe ref erred to was rasty and Plated with pinholes, and be offered the °Pmion aa* tbe vessel must have had, during ™yage to Searsport as much as a foot of water over eellmS of tbe hold-

d'he testimony on the other side as to this question of seaworthiness should also be referred to. There was a survey by the Suryoyor Schilpp on February 14th, before the vessel sailed. This survey seems to the court to have been quite casual and superficial. It was undertaken under a general contract between the surveyor and his insurance eompan7 and without particular reference to any repairs that, if necessary, should be made to the ship, or with reference to any particular contract or • proposed contract of freight movement. At that time the vessel was part-loaded so that a portion of her hull was nc|t opposed for examination, and she ■ was tying on the starboard side close to the pier upon which the surveyor stood to examine the hull. He could see only the starboard s^e °i the vessel and that imperfectly by reason of the conditions. He made no examination of the port side. His testimony is supported by a report which he made at that time to the insurance company that the vessei’s condition was good, and that she was sa^e ■®<>r the carrying of her cargo,

This testimony does not convince the court that the ship was in good condition, particularly as the surveyor Leach, employed, it would seem, by the same insurance company, had found the defects above described when the vessel was lying in the water at Norfolk, and he had access to her hull. There is also a survey made at Searsport after the vessel arrived with her damaged cargo by Concord 'and Gilkie. There is the unusual cireumstanee that two surveys are offered to the court, one by the libelant and one by the owner of the ship, signed by the same surveyors and contradictory in terms. One of these surveys is undated, but refers to the fact that the surveyors went on board the ship on March 16th and March 19th to survey the •damage to the cargo. The report shows that the cargo was badly damaged from water whieh, according to the report, apparently came down through the thick work at the beam ends, owing to the heavy rolling and straining of the schooner. The report states that the schooner seems staunch, sound, and in every way fit to make the voyage, and in the opinion of the subscribers the damage to the cargo was due to the unusual violent gales encountered in the passage.

On the other hand, there is the report offered by the libelant under date of March 21, 1929, referring to the same two visits of March 16th and March 19th. This report shows the quantity of damaged goods then noticed and concludes with the statement as follows: “As the survey was intended only to cover the cargo damage, we did not inspeet the hull of the vessel or examine the caulking.” This report is supported by an affidavit of the surveyors before a notary.

tj. ,. ,, . ,, , ,, . . , It seems to the court that the contrast be- , ,, , , . .... , tween these two reports is so striking, and , , ’■ - the statement m the second report mentioned ,, , ... „ , . that no examination of the hull was made is . „ ., , so definite, that it is impossible for the court , ,, . , • . to conclude that there was no damage to the , „ . , „ , . ,, ... . ,, hull or defect m the caulking observable. &

Finally evidence was offered by the. captain that there was no leak in the vessel during the early part of the voyage before the rough weather was encountered, and he accounts for the water which the vessel took entirely by reason of the violence of the storm, Reference was made during the testimony and during the argument of the case to some eyidenee of the surveyor Stein that the seams in the vessel at two or. three places were so wide apart that it was possible to insert a %g-inch ruler through the - shell planking, and, indeed, through the seams of the ship. It is argued that this is an extravagant statement at least, because it would have been impossiMe for the vessel, after having been loaded and after going to sea, to proceed without taking substantial quantities of water through these openings. It is not necessary to conclude that the openings in the seams were so very large that the vessel needed to be pumped all the time in order to find that there was defective caulking. It must also be borne in mind that the log of the ship; whieh. has been produced in court, has very little, if any, information in regard to the amount of water in the ship during the voyage, and it may well be that, before the rough weather was encountered, the pumps were adequate to keep the water in the hold within bounds, notwithstanding the defective eaulking. It is also most important in the opinion of the court that after the vessel returned to Baltimore she was caulked, and that she then went to Newport. News where the caulking was continued. There is also evidence that the steam pipe referred to was renewed. The testimony as to the caulking is verified by the captain of the ship, and that as to the renewing of the steam pipe was given by the purveyor Stein and not denied by the captain, N,° °ne has been P^dneed to show precisdy ^at repairs were made by the ship No bills ^ave been offered No survey on the part of the ship seems to have been made.

_ Under all these circumstances it seems to eourt conservative to state that the great preponderance of the evidence is that the S^P was leaky when she sailed, that the own-notice of her defect, but failed to take ^™-e remedy it.

It is, nevertheless, the theory of the own- ’. ers of the ship that under the terms or the . , , .. . . ,, . . „ charter party the shipper took the risk of , f ,/ 1 L. , ,. damage to the cargo, and that the cargo was , , ,, , • , , . „ , . ,, damaged through no inherent defect m the , ,, . , „ ,, ,, ship, but through the violence of the weather, T, ’ . ? , „ ,, , . It seems also to be the theory of the ship- ... . , , , owners that, even though there might have been some unseaworthiness of the ship, nevertheless, there would have been the same damage in a seaworthy ship if the violent winds which are recorded for the dates in -question had been encountered. The weathea? reports show that the wind ranged from 35 to 55 miles an hour at various points on the voyage.

One of the terms of the charter party relates to the loading of the ship, and this is re-Red on by the shipowner in this case. This eiaus0 provides: “The cargo is to be loaded, trimmed and discharged free of expense to the vessel, the vessel providing free use of her tackle and other equipment as on board. Cargo tobe shipped on the vessel’s skin at the risk and expense of the cargo. Dunnage, if required, to be for vessel’s account.” The shipowner claims that by the true construetion of this language the cargo owners assumed all the risk when they put the cargo on the ship; amongst other risks it took that which has been described as the blowing of the bilges in rough weather, such an oeeurrenee as was noticed in the opinion of this court in the Charles Rohde, 8 F.(2d) 506, 1925 A. M. C. 1594. It may be assumed for the moment that the cargo was shipped at the cargo owner’s risk. There are two matters to be considered in this respect, and tbe first one is whether any dunnage placed on the ceiling of the ship would have been adequate to protect the cargo in such a storm. The testimony of Mr. Vane, one of the shipowners’ experts, is that no wooden ship is safe for the shipment of cargo, no matter how seaworthy she may be if she meets a violent storm; that no amount of dunnage will protect the cargo from the water which will be blown from her bilges. There is uniformity of testimony that all wooden ships leak more or less, no matter how seaworthy they may be, and it was Mr. Vane’s opinion that water so taken would necessarily be blown through the crevices of the ceiling, so that no dunnage* would protect a cargo unless it was at least three feet high, and that such dunnage would be impracticable. The other witnesses in the ease do not go so far, but content themselves with saying that wooden ships generally will leak, but the burden of their testimony is that dunnage will protect the cargo. The court is unable in this case, upon the testimony referred to, to reach the conclusion that all wooden ships are to be condemned as ineffieient carriers of goods in rough weather, The preponderance of the evidence is the other way.

There remains in this connection the other question, whether the dunnage in this ease was adequate. It consisted of boards or timbers of some four inches thickness which were placed upon the ceiling over the-bilges. It is the testimony of Surveyor Stein that, if the ship was tight, the dunnage was sufficient; of Mr. Vickers, the head stevedore superintendent for the shipper, that in his experience dunnage of this sort was adequate and there is the further persuasive circumstance that the dunnage that was actually_ used was furmshed by the ship, and it would be a fair mference, if there were no testimony to the contrary, that the ship would not furnish m-adequate and insufficient protection to the cargo.

On the other hand, there is the testimony of several witnesses, the captain of the ship, Surveyor Leach and Surveyor Schilpp, to the general effect that dunnage should be more than four inches in height and should run from five to eight inches, varying according to the witness. There need be no citation of authority that the burden of proof as to this excuse for the damaged condition of the cargo is upon the ship, and, after a careful consideration of the evidence on the point, the court is unable to say that the dunnage in this case was not adequate. There is testimony to the contrary. But it seems to tbe court that it is sufficiently offset by the testimony of ex-perieneed men who gave evidence for the libelant which, when taken with the fact that the ship furnished the dunnage in question, makes the court unable to say that the charge of inadequacy of dunnage has been proved,

Moreover, it is the opinion of the court that the clause in question does not have the meaning for which the ship contends. It is said that the important sentence is this: “Cargo to be shipped on the vessel’s skin at the risk and expense of the cargo.” This is said to be an all-inclusive phrase, and i'ndieates that any damage to the cargo from the placing of the cargo on the vessel’s skin is to be borne by .the shipper. This sentence, it is contended, should influence the interpretation 0f the following one, which is, “Dunnage, if required, should be for vessel’s account,” and from this combination of sentences it is urged that the shipper takes all the risk of shipping 0n the skin or of determining what kind of dunnage should be used and of seeing that it js furnished, and, if the shipper fails to require the proper dunnage, then the loss is at his risk..

It seems to tbe court tbat it is reasonable to apply to the interpretation of this clause the rule .which was laid down in the Caledonia, 157 U. S. 124, 15 S. Ct. 537, 543, 39 L. Ed. 644, where the court, speaking of exeeptions in a bill of lading, exempting the shipowner from certain liabilities, said: “As the exceptions were introduced by the shipowners themselves in their own favor, they are to be construed most strongly against them.”

Th¡g charter d is on a p.rinted foIm fumished by the ship’s brokers. The exeeptions referred to are in typewriting. But there geemg nQ a reason to the eourt why these exceptions, having been put in by the brokers for the benefit of the vessel, should-not be eonstrued strictly against the vessel, To the mind o£ the court tliese sentences indieate an alternative option offered to the-shipper: The cargo may be shipped upon the skin of the ship, and, if so, the' shipper takes-the risk; the cargo may be deposited upon dunnage, if the shipper prefers, and, if so, thedunnage is to be furnished by the vessel and charged to the vessel’s account. Under this, interpretation it is the duty of the vessel to furnish the dunnage, and it seems unreasonable to charge .the shipper with the responsibility for getting the proper kind of drnnage. While the shipper in this case happens to be an experienced one, certainly it had i o particular knowledge of the requirements of this-particular ship, and when the shipper gave notice, as he did in this ease, that dunnage would be required, it was the vessel’s duty to furnish adequate dunnage, and, if such was not furnished, the risk was the vessel’s, and not the shipper’s. There is a difference, it seems to the court, between the circumstances of the case at bar and that of the Harry F. Hooper (D. C.) 42 F.(2d) 758, 1930 A. M. C. 1071, and in the ease of the Elizabeth Edwards (C. C. A.) 27 F.(2d) 747, 1928 A. M. C. 1281, for in these eases it is clear that the risk of the particular stowage was taken by the cargo owners, ahd there was no such alternative clause as that referring to dunnage in the charter party in this suit.

It is the conclusion of the court that the libelant is entitled to a decree, crediting, how-over, thereon the amount of freight money retained, and that the cross-libel of the owner of the ship for freight should be dismissed.