author: McCOKMICK, District Judge.

text:
    HARVEY et al. v. WRIGHTSMAN.
    District Court, S. D. California, S. D.
    March 31, 1931.
    Lyon & Lyon, Frederick S. Lyon, Leonard S. Lyon, and I. L. Fuller, all of Los. Angeles, Cal., for plaintiffs.
    Westall & Wallace and Joseph F. West-all, all of Los Angeles, Cal., for defendant.
   McCOKMICK, District Judge.

This is a suit in equity for infringement of United States letters patent No. 1,552,332, granted September 1, 1925, to Chester D. Miller and Leo M. Harvey, on an application filed September 2, 1924, for air deflector. The plaintiff has regularly succeeded to all the rights of the patentees and is the sole owner of the patent and of the invention claimed therein. The principle defenses asserted by defendant and relied upon at the trial and in the briefs are: First, no invention; and, second, noninfringement. The subject-matter of the patent in suit is concerned with air deflectors for mounting on the doors of an automobile of the closed type. The construction of such air deflectors, as disclosed in the teachings of the patent in suit, is such that it acts as a valve so that the driver or other occupant of the car can adjust this valve to control the degree of ventilation for the interior of the ear or as winter weather conditions require, he can close' the valve entirely so as to shut out the air currents from the interior of the ear. The whole device is mounted on the outside of the door so that there is no interference with the opening or closing of the ear door as the air deflector moves with the door and remains at all times in fixed adjustment in respect to the door.

There are two claims, and both are in issue in this suit. Claim 1 reads: “An air deflector comprising brackets adapted for mounting on the outer face of an automobile door above and below the opening in said door and provided with bearings, clamping members having horizontally extending legs and vertical flanges, pivots projecting from the legs of the clamping members, a glass having its upper and lower edges interposed between the flanges and the second clamping members, and its front edge located so as to be positioned against the face of the door, or through said pivots to be adjusted to increase or diminish the space between said edge and the door, and means to draw the second clamping members toward the flanges.” Claim 2 is as follows: “An air deflector comprising brackets adapted for mounting on the outer face of an automobile door above and below the opening in the door and provided with bearings, clamping members having horizontally extending legs and vertical flanges, pivots projecting from the legs of the clamping members and engaging the bearings, co-operating clamping members, a glass having its upper and lower edges interposed between the flanges and the last-named clamping members and its front edge arranged to fit against the door or to be adjusted through said pivots so as to increase or diminish the space between said edge and the door and thus vary the amount of air admitted through said space to the opening in the door.”

The patent is presumed valid, and, in the absence of clear and indubious proof that it is anticipated by prior or patented art, it must be sustained. There are two patents that are especially urged by the defendant to defeat the patent in suit and to divest it of any inventive quality. They are Knapp1, No-. 1,444,191, filed July 28, 1920, and granted February 6, 1925, for an air deflector for automobiles, and Margason, No. 1,503,510, filed August 16, 1923, and granted August 5,1924, for a windshield for closed motorcars. The file wrapper of the patent in suit reveals that at the time the application was pending it was considered by the Patent Office that the claims of the plaintiff involved no patentable novelty over the art of record as shown by the two aforesaid earlier patents, the opinion of the examiner stating:

“It is not seen that there is any material difference between the two claims. ■
“The claims are rejected as being devoid of patentable novelty over the art of record for the reasons given in the last action. The windshield structure recited is substantially anticipated by Knapp. The mere fact that the shield is mounted on a closed car rather than on an open one cannot confer novelty, especially in view of Margason who shows a windshield mounted adjacent the opening in the door. There is obviously no invention in substituting a conventional shield of the adjustable type, such as illustrated by Knapp for the shield of Margason.”

Thereafter upon -an explanatory statement by an attorney for the patent applicant the matter was reconsidered and the patent in suit granted with the two aforesaid claims.

In addition to such patent references, there is much evidence in this record showing the manufacture and commercial use and sale of windshields and deflectors for automobiles of the closed and California top types during a period antedating the application for the patent in controversy, some of this evidence revealing commercial manufacture and uses prior to the conception of the invention here claimed by plaintiff. It is unnecessary herein to set it forth. Suffice it to say that, while it raises doubt as to any inventive quality of the patent, it is considered insufficient in law to justify overthrowing the presumption of invention that attaches to the patent by reason of its issuance. I understand the rule to be, in so far as the defense of nonpatentability or lack of invention is concerned, that, if any doubt remains after considering all of the evidence as to whether the patent is valid, such doubt should be resolved in favor of the patent, and its validity sustained. Schumacher v. Buttonlath Mfg. Co. (C. C. A. 9) 292 F. 52.2,

However, the rule is equally well settled that, while the evidence may be insufficient to overthrow the presumption and defeat the patent, it may be instructive and illuminating upon the range of the invention and upon the scope of its allowed patent claims in the ascertainment of whether or not other combinations or devices infringe the patentees’ rights. I believe that the ruling of the Patent Office that has been adverted to suggests that, although the application was later granted, it was by no means considered to be a generic or primary invention. This was apparently the ease in the Patent Office in the light of the citations found in the file wrapper and contents, and it is certainly the conclusion to be di’awn from these references and the additional evidence shown by the record in this suit. The testimony of the witnesses Lillie, Eisenhardt, Bonness, Morgan, Milligan, Callahan, Shugers, and others corroborated by documentary evidence of commercial uses and sales of windshield deflectors for inclosed type ears and by the production of devices, present such a picture of the state of the prior art in air deflectors for automobiles of the inclosed type at the time of the Miller and Harvey invention that its two claims must be narrowly construed, and that the patent does not embody a basic invention but one that is properly classified as a structural improvement. When the evidence adverted to is analyzed and considered, it is clear that the combination of the claims in suit are specifically limited to two clamping members and screws to hold them together, .and that the phrase in claim 1, “and means to draw the two clamping members toward the flanges,” designate and connote exclusively the screws 23 that enter through holes or apertures in the flanges, and that have threaded engagement with holes 22 in the clamping members. To enlarge or amplify the quoted phrase so as to cover and include air deflectors that are constructed without the use or employment of such' screws and with but one grooved clamping member as illustrated by Plaintiffs’ Exhibit 7, the alleged infringing device, would be to rule out of the picture of the pri- or art the several progressive steps shown to have been taken in the production of air deflectors suitable and adaptable to motorcars of the inclosed type, and to rewrite the claims. This would be an improper method of interpreting the scope of the patent that, according to the file wrapper and contents, was for an improvement in air deflectors. Claim 2 is substantially the same as claim 1. It is not entitled to a broad interpretation. The plaintiff is fully protected in the light of the proven state of the art in the enjoyment of what was actually invented by limiting the patent and its claims to the specific structures shown by the verbiage and drawings of the patent itself. This invention is not of sufficient dignity to establish a complete monopoly in the closed car air deflector industry. An examination of Plaintiffs’ Exhibit 7 satisfies one of marked and substantial differences from the disclosures and limited claims of the patent in suit. Defendants’ deflector disclosed no clamping members; the glass is secured in place by being wedged in a solid channel or groove. In this respect defendants have followed the art as it was developed long prior to the invention in suit and as illustrated by several devices that have been introduced in evidence. Defendants’ Exhibit Y illustrates the solid, channel method of wedging the glass that has just been mentioned, and there are other exhibits in the ease which similarly illustrate this feature of construction. The two clamping members and screws to hold the clamping members together constitute an essential element in the combination of the claims of the patent. The rubber or felt strip cannot be considered as a clamping member in view of the prior art shown. The mode of operation ■of Exhibit 7 is substantially dissimilar and different from the patent disclosed, and, in such a situation, identity of result, even if present, is not proof of infringement. The means used by defendant to accomplish the result are not the means described and claimed in the patent, and, moreover, the means utilized by defendant do not operate to produce the result in the same way. Cimiotti Unhairing Co. v. American Fur Refining Co., 198 U. S. 399, 25 S. Ct. 697, 49 L. Ed. 1100. There are other distinguishing characteristics and features between the patent and Exhibit 7 that to my mind defeat the claim of infringement herein, but sufficient has already been, said to indicate that the patent in suit has not been infringed by the defendant by the manufacture or sale of Plaintiffs’ Exhibit 7.

The patent, No. 1,552,332, for an air deflector, is held valid and not infringed by defendant, and accordingly defendant is entitled to a decree of dismissal, with costs. It is so ordered.


source: Caselaw Access Project

author: JAMES, District Judge.

license: Public Domain

text:
    LORRAINE CORPORATION v. UNION TANK & PIPE CO.
    District Court, S. D. California, Central Division.
    Feb. 14, 1930.
    Decree affirmed in 48 F.(2d) 848.
    Westall & Wallace, of Los Angeles, Cal., for plaintiff.
    Ford W. Harris, of Los Angeles, Cal., and Herbert A. Huebner, of New York City, for defendant.
   JAMES, District Judge.

This suit concerns the alleged infringement of patent rights claimed by the plaintiff as covering forms of a device used to separate gas from oil. Gas traps are in general use in oil-producing fields throughout the country. No description in great detail, either of the general character of gas traps or of the principle upon which they operate, need be given. There are many forms of them, all having, in the main, similar characteristics of shape, construction, and arrangement.

The Department of the Interior of the United States, through its Bureau of Mines, in 1919, issued a comprehensive booklet, setting forth the economical advantages of the use of gas traps at producing oil wells. That booklet was issued prior to the date of either of the patents herein sued on. In it there are illustrated gas traps having float means within the metal container which, through the rise and fall of the fluid brought in from the well, serve to open and close an outlet valve to allow the escape of fluid, aud to act similarly on a gas valve to allow the taking off of the gas. The desirability of maintaining pressure within the container is referred to in the government publication; in fact, all of the general advantages which are claimed for any of the devices referred to in suit' are catalogued in detail as being desirable of attainment by the use of gas traps.

The patents in suit of Lorraine are respectively reissue No. 15,220, dated November 8, 1921, being reissue of No. 1,373,664, dated April 5, 1921; No 1,396,860 dated November 15, 1921; No. 1,577,917, dated March 28, 1926; and No. 1,620,771, dated May 15, 1927. It is not contended by the plaintiff that each of the claims of all of the patents referred to.has been infringed, and in fact the issue seems to be narrowed to certain claims of reissue No. 15,220 and claim 12 of No. 1,396,860. In view of the fact that the principal Lorraine patents have been before both this court and the Circuit Court of Appeals in several cases, and, as to at least a part of their claims, have been given close examination, it seems that it will be of no advantage to enter upon a lengthy explanation and analysis of the devises involved, with all of their particular mechanics.

The controversy, as I am able to understand it, is narrowed to the question as to whether the use of outlet valves respectively for oil and gas, operated synchronously by means of a float within the trap receptacle, is a novel feature of plaintiff’s contrivance.

On some of its devices, the plaintiff has one of the valves placed exteriorly of the container chamber, as illustrated by reissue No. 15,220, and No. 1,577,917, and No. 1,620,771. In No. 1,396,860., the outlet -valves are both placed interior of the chamber. Plaintiff claims nothing for an improved form of- valve, but insists that there is novelty in the means used through the influence of the float, by which the outlet valve for the liquid is opened while the gas valve is at the same moment closed. Whether there is novelty in the arrangement shown by the operation of exterior valves through crank means extending into the chamber and connected with the float is not an issue here. The valves and the means operating the same, of the defendant’s trap, are all inclosed within the receiving and discharge chamber. The same general arrangement, adapted to produce the identical results, is described in the Moore patent, issued May 20, 1890, antedating by a number of years the time when it is claimed plaintiff’s devices were conceived. The patent to Ballard, issued January 13, 1920; also shows a gas trap having synchronously operating discharge gas and fluid valves, with a float as the means of producing the operating force. Whether Moore considered or comprehended that his device might be made to produce the different effects in a gas-separating receptacle, as are produced in the Lorraine devices, is immaterial. The parts and mechanical operation are the samé, and it is quite clear that the securing of the effects claimed by Lorraine would be a matter of adjustment. As is said by Walker in his work on patents (5th-Ed.) page 218, it is not important to the protection of an -invention that the principle of it is not fully understood by anyone, or not understood alike by all, “or that all its advantages and possibilities were not understood by or known to the inventor.” Defendant has cited further authority to this same point.

I do not see how the conclusion can be avoided that the material claims of the patents, in suit here have been fully anticipated by the Moore and Ballard patents.

Counsel are not to conclude because of the brevity of this opinion that the evidence and argument have been given but cursory attention. A very painstaking study was made of the ease, hut it does not seem to me-that more than a summary of the conclusions on what I deem to be the determining issue will be of any service. The filing of printed' briefs by both counsel has greatly facilitated the examination of the points used in argument, and the courtesy shown in that regard is appreciated.

Decree will be for the defendant as indicated. The decree will not And that the crank means, operating valves exteriorly placed, is not new and novel and entitled to patent;, that will be left an open question.


author: RUDKIN, Circuit Judge.

text:
    LORRAINE CORPORATION v. UNION TANK & PIPE CO.
    No. 6306.
    Circuit Court of Appeals, Ninth Circuit.
    March 16, 1931.
    Rehearing Denied May 11, 1931.

      Westall & Wallace and Joseph F. West-all, all of Los Angeles, Cal., for appellant.
    Ford W. Harris, of Los Angeles, Cal., for appellee.
    Before RUDKIN, WILBUR and SAWTELLE, Circuit Judges.
   RUDKIN, Circuit Judge.

This is an appeal from a final decree dismissing a suit for infringement of letters patent. The patents involved are reissue No. 15,220, dated November 8, 1921, being a reissue of patent No. 1,373,684, dated April 5, 1921; also patents Nos. 1,396,880, dated November 15, 1921, 1,577,917, dated March 23, 1926, and 1,620,771 dated March 15, 1927. These several patents were issued to David G. Lorraine, and by him assigned to the Lorraine Corporation, the appellant here.

Speaking generally, the patented device in controversy is an apparatus, or gas trap, employed for the purpose of separating the oil products, gas, sand, water flowing from oil wells. We had occasion to consider this and similar devices in Lorraine v. Townsend (C. C. A.) 290 F. 54, and Lorraine v. Townsend (C. C. A.) 8 F. (2d) 673, 675. In discussing the first Lorraine patent and the reissue, in the latter ease, we said: “The vertical partition is open at the top, so as to permit the collection of gas under pressure to be delivered to the outlet pipe at the top of the cylinder. This partition extends below the normal level of the oil, but terminates a considerable distance above the bottom of the separator. The oil from the well in the Lorraine trap is introduced into the segment lying between the vertical partition and the outer wall of the separator. It passes under the vertical partition into the main chamber of the separator. The sand and water are given an opportunity to settle to the bottom, where they can readily be drawn off. The oil outlet is on the side of the separator. It is operated by a valve, which is controlled by a float resting on the surface of the oil. This float also controls a valve which is attached to the gas outlet. It permits the discharge of oil as the oil level rises, and the discharge of gas as the level of the oil falls. The synchronized valve attachment and the segmental division of the trap are the Lorraine inventions. The testimony satisfies us that they constitute a distinct improvement over the old separators. They permit the discharge of gas or oil, as the situation may require. They are effective in preventing the flow of oil into the gas outlet and of gas into the oil outlet. The partition protects the float from interference by the in-coming oil, and the separator, as a whole, provides good facilities for the settlement of sand and its convenient removal.”

We are not now concerned with the vertical partition, because none such is found in the gas trap manufactured and sold by the appellee. The only material issue in the case was thus clearly stated by the court below: “The controversy, as I am able to understand it, is narrowed to the question as to> whether the use of outlet valves respectively for oil and gas, operated synchronously by means of a float within the trap receptacle,, is a novel feature of plaintiff’s contrivance.” 48 F.(2d) 848.

Upon this controlling issue the court found that the claims of the several patents in this regard were anticipated by the Moore and Ballard patents, Nos. 428,399' and 1,327,-691; and with that conclusion we are in full accord. The Ballard patent disclosed a float in a trap, connected by rods with the valve controlling the gas outlet, above, and the valve controlling the oil outlet, below, so that when the float raised the oil valve opened and the gas valve closed, and vice versa. The same is true of the Moore patent. In the latter, a bar, or rod, extended from the float to the outer edge of the trap, to which was attached a rod connecting with the gas valve above and another rod connecting with the oil valve below, and when the float raised the gas valve closed and, by the same operation, the oil valve opened.

It may be urged that such a result was not intended, nor its importance appreciated, by either Moore or Ballard; but the principle was there, if not already old, and its application required nothing more than ordinary mechanical skill.

Some reliance seems to be placed on the statement in our former opinion that the synchronized valve attachment and the segmental division of the trap were the Lorraine inventions; but it must be remembered that the sole question determined on that appeal was that certain claims in the reissue were void because not embraced in the original patent.

Little was said during the trial concerning the last two Lorraine patents, but none of the patents was adjudged invalid. The court simply determined that the claim upon which the charge of infringement was based, whether found in one or more of the patents, was void for anticipation, and for that reason dismissed the complaint.

The decree is affirmed.


author: ST. SURE, District Judge.

text:
    TOYO KISEN KAISHA v. W. R. GRACE & CO.
    No. 17640.
    District Court, N. D. California, S. D.
    Feb. 17, 1931.
    Knight, Boland & Christin, of Ban Francisco, Cal., for libelant.
    Orrick, Palmer & Dahlquist, of San Francisco, Cal., for respondent.
   ST. SURE, District Judge.

Libelant seeks to recover freight charges in the sum of $17,557.89, claimed to be due for a shipment of. nitrate of soda b.y respondent on one of libelant’s vessels from the ports of Antofagasta and Iquique, Chile, during the month of March, 1921, destined for Honolulu. The ship and cargo were destroyed by fire at sea.

In the early part of January, 1921, the agent of respondent in San Francisco contracted for the sale of' some nitrate in Honolulu, and, in order to arrange for the transportation thereof from Chile to Honolulu, entered into negotiations with libelant’s San Francisco offiee relative to the shipment of this nitrate on one of libelant’s vessels. As a result of these negotiations a special freighting agreement was entered into, evidenced by the following letter:

“San Francisco, January 14, 1921.
“Toyo Kisen Kaisha S. S. Co., No. 625 Market Street, San Francisco.
“Gentlemen: Referring to telephone conversations during the past few days, we wish to confirm freight engagement with you as follows:
“2,500 long tons Nitrate of Soda March shipment per 'Tokuyo Maru’ from Nitrate Port to Honolulu at $7.00 per ton of 2,240 lbs. gross weight delivered.
“Freight payable in San Francisco on receipt of weights from Honolulu.
“This cargo to be loaded according to custom of port in Chile and to be discharged at rate of D. 400 tons -per day. 2000 tons to be discharged at railroad wharf, Honolulu, and 500 tons at Inter-Island Steam Navigation Co.’s wharf, which is adjacent to the railroad wharf and only necessitates the pulling ahead of the vessel.
“One-half (%) - cost of weighing to be borne by the consignee at Honolulu and one-half (%) to be paid by vessel.
“AH on board to be delivered.
“Kindly confirm on copy of this letter attached herewith.
“Yours very truly,
“W. R. Grace & Co.
“Traffic Department.
“K. Doi
“Confirmed:
“FPH :KR”

Thereupon respondent’s. San Francisco agent notified its Valparaiso office of this agreement in the following letters:

“Valparaiso House
“No. 4630 Jan. 14/21 13
“Nitrate of Soda Potash
“ 'Tokuyo Maru’ March
“We have arranged shipment of this parcel through the local office of the T K K on the ‘Tokuyo Maru’ scheduled to sail from Nitrate Port about the middle of March, at a rate of freight of $7.00 per 2240 lbs. gross weight delivered, from Nitrate Port to Honolulu. Freight payable in San Francisco.
“This shipment is to be consigned to Pacific Guano & Fertilizer Co. loading at rate of 500 tons per day or better and discharge not to exceed 400 tons per day.
“Freight is payable in San Francisco on receipt of weights from Honolulu. In making up Bs/L we would ask you to kindly omit freight therefrom, and just let the same carry the clause ‘freight as agreed/
“W. R. Grace & Co.
“[Signed] F. P. Hughes,
“FPH:KR Import Department.”
“Valparaiso House
“No. 4634 Jan. 17/21 13
. "Nitrate of Soda
“SS ‘Tokuyo Maru’
“Our No. 4630
“We have sold for shipment by the ‘Tokuyo Maru’ scheduled to load early part or middle of March 500 tons Nitrate of Soda 95% to be shipped to F. A. Schaefer & Co. Honolulu; same terms and conditions concerning rates and payment of freight as given in our letter under reference.
“Care should be exercised to have this lot stowed separately from the Nitrate of Soda Potash. Heretofore we regret to state in previous shipments of both these commodities on the same boat they have become mixed and you will readily appreciate that when we do not obtain the full quantity of Nitrate of Soda Potash we also lose on account of its higher price.
“Yours very truly,
“W. R. Grace & Co.,
“[Signed] F. P. Hughes,
“FPH :KR Import Department.”

The letters of respondent’s .agent contain the only notice or advice the .Valparaiso office of respondent ever had relative to the transaction. The instructions received with reference to freight were: “In making up Bs/L we would ask you to kindly omit freight therefrom, and just let the same carry the clause ‘freight as agreed.’ ” With these instructions before him, the Valparaiso agent, in March, 1921, accepted two printed forms of bills of lading with the typewritten insertion in the margin, in one case, “Freight as per agreement,” and, in the other, “Freight as agreed.” .

Libelant rests its whole case upon the bills of lading, and particularly upon the printed clause contained therein reading: “Said freight to be. considered earned, lost or not lost.” It is argued that this printed clause is a term of the contract of affreightment, binding upon respondent because of the .acceptance of the bills of lading by respondent’s agent in Valparaiso. It will be noted, in this connection, however, that the bills of lading omit freight rates, but contain the typewritten words in the margin thereof, “Freight as per agreement,” and “Freight as agreed,” in accordance with the written instructions above mentioned, and there is no doubt but that said typewritten words refer to the special agreement of affreightment entered into between the parties in San Francisco.

I am in accord with the contention of respondent, which is that the verbal agreement entered into and the letter confirming same written in San Francisco prior to the shipments of the nitrate from the Chilean ports constitute the agreement of affreightment, and that the bills of lading were merely receipts for the freight, given subsequently, and therefore, under the circumstances, are no part of the contract of affreightment. See Northern Pacific Rv: Co. v. American Trading Co., 195 U. S. 439, 25 S. Ct. 84, 49 L. Ed. 269; The Arctic Bird (D. C.) 109 F. 167.

The libel will be dismissed.


author: GALSTON, District Judge.

text:
    GUITERMAN v. PENNSYLVANIA R. CO. et al.
    No. 5382.
    District Court, E. D. New York.
    March 31, 1931.

      Prank M. Swacker, of New York City (H. P. O’Donnell, of New York City, of counsel), for plaintiff.
    O’Brien, Boardman, Conboy, Memhard .& Early, and Alfred A. Gardner, all of New York City (Alfred A. Gardner, Philip W. Boardman, and John Vance Hewitt, all of New York City, of counsel), for defendant Pennsylvania R. Co.
   GALSTON, District Judge.

This action was begun in the Supreme Court of the state of New York, Nassau county, by the service of a summons and complaint 'on the Pennsylvania Railroad Company on January 2, 1931. That company was the only defendant served. On the petition of the railroad company, the action was removed to this court.

By this motion the defendant Pennsylvania Railroad Company seeks to set aside ithe service of the summons and complaint .and to have the complaint dismissed, upon ■the grounds that the Supreme Court of the ■state of New York acquired no jurisdiction either over the defendant for the cause of action alleged in the complaint, or over the .alleged cause of action.

It is conceded that, if the state eourt had no jurisdiction over the subject-matter, this -court acquired none on removal.

The plaintiff is a stockholder of 100 ■shares of the capital stock of the Pennsylvania Railroad Company. She alleges that the Pennsylvania Railroad Company, some time between February 1, 1927 and June 30, 1928, acquired, by purchase, shares of the capital stock of the Wabash Railroad Company amounting to 48 per cent, of the total issued and outstanding stock and about 30 per cent, of the total capital stock issued of the Lehigh Railroad Company. It is also alleged that the Wabash Company owned and controlled 19' per cent, of the outstanding capital stock of the Lehigh Company, and that in consequence the Pennsylvania Company controlled approximately 49 per cent, of the total outstanding capital stock of the Lehigh Railroad Company. Such holdings are alleged to have been more than 50 per cent, of stock, which during the last five years preceding the filing of the complaint ■was represented at stockholders’ meetings of these two companies, and thus in effect constituted a practical control by the Pennsylvania Railroad Company of each of said two railroad companies.

It is said that but for these acts of the defendant, the three railroad companies would be in active, keen and direct competition, and that the purpose and effect of the acquisition of the aforesaid securities by the Pennsylvania Railroad Company were in violation of the Act of Congress of July 2, 1890', known as the Sherman Anti-Trust Law, and acts amendatory thereof (15 USCA § 1 et seq.), and also of the Act of Congress of October 15, 1914 (38-Stat. 730), known as the Clayton Act and acts amendatory thereof, and that in consequence the railroad company became subject to continuing liability of the penalties provided in the Anti-Trust Act.

It further appears from the complaint that, on May 6, 1929, the Interstate Commerce Commission issued its complaint under the Clayton Act against the Pennsylvania Railroad Company concerning the acquisition of the aforesaid stocks of the Wabash Company and the Lehigh Company, and after due hearing found that the three companies were competitors in interstate commerce, and that the stocks acquired by the railroad company were not acquired solely for the purpose of investment. The Commission accordingly issued its order directing the Pennsylvania Railroad Company to divest itself of its holdings in the other two companies.

It is alleged that the price paid by the Pennsylvania Railroad Company for the securities purchased was exorbitant, the total cost being in excess of $106,500,000', and that the Pennsylvania Railroad Company has sustained and will continue to sustain a loss of not less than $2,500,000 annually, the excess of carrying cost over the dividends received on the said stocks.

The plaintiff seeks, therefore, to have the acts of the railroad company in the purchase hy the railroad company of the aforesaid capital stock of the other two railroad companies adjudged unlawful and a breach of trust on the part of the defendant directors. She seeks an accounting, and prays that judgment of the amount of the losses sustained be rendered against the defendant directors and ordered to be paid by them to the treasury of the railroad company. Further relief demanded is that, upon the satisfaction of the judgment, the railroad company turn over to the defendant directors or their nominees the shares of stock held by the Pennsylvania Railroad Company in the other two railroad companies; and, finally, that, if any penalties under the Sherman Anti-Trust Act or any other act are exacted against the railroad company, the defendant directors be required to reimburse the railroad company.

The critical question involved is whether the state court had jurisdiction of the subject-matter of this action. It is contended by the defendant that cases arising out of the Sherman and Clayton Acts are within the exclusive jurisdiction of the federal court, and reliance is had on General Investment Co. v. Lake Shore & M. S. Ry. Co., 260 U. S. 261, 43 S. Ct. 106, 117, 67 L. Ed. 244.

That was a suit in equity begun in the state court’of Ohio. The plaintiff sought to enjoin a proposed consolidation of certain railroads on the ground that such consolidation would contravene the Sherman AntiTrust Act and the Clayton Act. The cause was removed, as herein, to the federal court. The jurisdiction of the court was then assailed on the ground that the plaintiff had no standing to sue under the. Sherman AntiTrust Act or the Clayton Act in the state court. The court said, referring first to the Sherman Anti-Trust Act: “The present suit for an injunction, brought by a private corporation in its own interest, was not within those remedies, and so could not be maintained under that act standing alone.”

And again, referring, to the eighteenth section of the Clayton Act (15 USCA § 26): “This section undoubtedly enlarges the remedies provided in the Sherman Anti-Trust Act to the extent of enabling persons and corporations threatened with loss or damage through violations of that act to maintain suits to enjoin such violations, save in the instances specified in the proviso. This right to sue, however, is granted in terms which show that it is to be exercised only in a ‘court of tbe United States.’ This suit was brought in a state court, and in so far as its purpose was to enjoin a violation of the Sherman Anti-Trust Act that court could not entertain it. The situation was the same in respect of the purpose to enjoin a violation of the Clayton Act.”

It may be noted that the relief sought herein is not injunctive. Plaintiff seeks not to restrain the defendants, but to obtain an accounting and to compel the individual defendants to reimburse the railroad company for any losses sustained arising out of their alleged illegal acts. Did the Supreme Court, in General Investment Co. v. Lake Shore & M. S. R. Co., in holding that a state court had no power to grant the statutory relief (i. e., that of injunction), foreclose a state court from entertaining jurisdiction of any other relief which might flow from a violation of the two acts or either of them? I cannot so interpret the opinion. On the contrary, proper significance given to the expression, “in so far as its purpose was to enjoin,” etc., justifies the deduction that a state court might have jurisdiction of a cause which sought a different relief. There is nothing in the language of the opinion to warrant one in drawing the inference that the court excluded a state court from jurisdiction as to all rights which might relate to the Sherman Anti-Trust Act. At most, the Supreme Court said that only as its purpose was to enjoin a violation of the Sherman Anti-Trust Act was the state court without jurisdiction.

The plaintiff therefore properly contends that the question was not settled by the Supreme Court in General Investment Co. v. Lake Shore & M. S. Railroad Co.; and she urges that the remedy sought herein is in no sense statutory, but of such general equitable nature, as was approved in De Koven et al. v. Lake Shore & M. S. Ry. Co. et al. (D. C.) 216 F. 955, 957. In that suit the court said: “The present suit is one by a dissenting minority stockholder to restrain the majority stockholders from accomplishing what is asserted to be an illegal or ultra vires act. It is, therefore, a well recognized species of general equity jurisdiction and not a mere statutory remedy, conferred by the Anti-Trust Law. The plaintiffs would be entitled to resort to this remedy if the Sherman Law had provided no equitable remedy for its enforcement, and the fact that it did provide one, available only to the United States, cannot be held to deprive an individual of an equitable remedy which was open to him before and independent of the statute. The fact that the relief granted to the government in an equity suit, instituted by it under the Sherman Law, might be of the same nature as that granted an individual plaintiff cannot change the result. Nor can the fact that the illegal or ultra vires act is made so only by the statute, which creates the equitable statutory remedy, do so. If it be an illegal or ultra vires act, however made so, a minority stockholder had, under the general principles of equity jurisprudence, a remedy to restrain the corporation and the majority stockholders from accomplishing it, of which he is not deprived by the creation of a statutory equitable remedy in favor of the government alone, and of which he is not permitted to avail. It seems clear that if the Sherman Law had declared combinations in restraint of trade illegal and ultra vires, and provided no equitable remedy in favor of the government or any one else, the interest of a minority stockholder that his shares should not be involuntarily transferred from a lawful to an unlawful enterprise would entitle him to complain of the proposed action of the corporation, through the majority stockholders, in a suit in' equity. The providing of such a statutory remedy, which could be availed of only by the government, ought not to be construed to take away by implication the existing remedy of the individual stockholder under general equity principles.”

In other words, Judge Grubb held that at least in the federal court an individual stockholder could bring a suit in equity to restrain the commission of an act made unlawful by a statute of the United States.

Judge Hough, in Boyd v. New York & H. R. Co. (D. C.) 220 P. 174, 180, takes the same view: “But if private litigants have and seek to assert a private right which is molested, or in danger of violation; and if such actual or threatened infringement consists not merely in contract breaking or other private delict, but also gives rise to transgressions of public law — then private litigants may invoke that law and urge as an additional and potent reason for protecting their private rights the fact that the threatened assault upon the same will constitute not only a breach of obligation but a public wrong. De Koven v. L. S. & M. S. Ry. Co. (D. C.) 216 P. 955.”

Of course it may be noted, that neither De Koven v. Lake Shore & M. S. Ry. Co. nor Boyd v. New York & H. R. Co. et al. involved the question of the jurisdiction of a state court in similar circumstances. But it was said in Claflin v. Houseman, 93 U. S. 130, 135, 23 L. Ed. 833: “Other analogous cases have occurred, and the same result has been reached; the general principle being, that, where jurisdiction may be conferred on the United States courts, it may be made exclusive where not so by the Constitution itself; but, if exclusive jurisdiction be neither express or implied, the State courts have concurrent jurisdiction whenever, by their own constitution, they are competent to take it.”

Now there is nothing in the Sherman Act or the Clayton Act which expressly gives exclusive jurisdiction to the federal courts in respect to violations of individual private rights; nor is there such exclusive juris- ■ diction vested in such courts by implication.

It is true that section 4 of the Sherman Anti-trust Act (title 15; U. S. Code § 4 [15 USCA § 4]) vests the Circuit Court of the United States with jurisdiction to prevent and restrain violations of the act, and empowers United States attorneys to institute proceedings in equity to prevent and restrain such violations; and section 7 (title 15, U. S. Code, § 15 [15 USCA § 15]) of the act empowers any person who has been injured in his business or property, by reason of anything forbidden by the act, to sue in any Circuit Court in which the defendant resides or is found to recover damages.

But those two provisions relate to remedies. It is unreasonable to suppose that the act was intended to exclude persons who had equitable rights, arising out of anything forbidden or declared to be unlawful by the act, from pursuing their remedies in a proper jurisdiction.

Similarly provisions of the Clayton Act (title 15 U. S. Code, §§ 21, 25 [15 USCA §§ 21, 25]), in conferring jurisdiction upon the Interstate Commerce Commission to enforce compliance with sections 13,14,18, and 19 of-the act, and upon the District Courts of the United States with jurisdiction to prevent and restrain violations of sections 12 to 27, did not exclude private persons, whose rights were affected by unlawful or illegal acts, from seeking redress in state courts.

The question of the administration of federal laws in state courts is certainly not new. Justice Washington, in Houston v. Moore, 5 Wheat. 1, 5 L. Ed. 191, shows that, so long as Congress does not exercise its power to make the jurisdiction of the federal courts exclusive, the state courts are not prevented from exercising jurisdiction, even over eauses arising out of the acts of Congress, if they can find the requisite authority in their own inherent powers.

Questions as to the concurrent jurisdiction of state courts in causes arising out of the federal laws have been frequently raised in actions involving national banks. Brinckerhoff v. Bostwiek, 88 N. Y. 52, holds that a state court has. jurisdiction, on an action by the stockholders of the national bank against its directors, to recover damages sustained through the latter’s negligence. The court in part said: “The jurisdiction of the State court to entertain the action is also challenged by the demurrer. The right of action is not in our opinion derived from the act of Congress, but depends upon general principles of equity; but in any aspect of the ease the State courts have concurrent jurisdiction, unless exclusive jurisdiction has been conferred upon the United States courts. Claflin v. Houseman, 3 Otto [93 U. S.] 130 [23 L. Ed. 833]; Robinson v. Nat. Bank of Newberne, 81 N. Y. 385, 37 Am. Rep. 508; National Bank of Gloversville v. Wells, 79 N. Y. 498, affirmed in the Supreme Court of the United States, January, 1882.”-

Now, in the ease at bar, essentially the issue is whether the defendant directors committed an ultra vires act. That is the general allegation. The action rests on that broad charge. The particular ultra vires act alleged to have been committed arises out ■of the Sherman Act and the Clayton Act. The Supreme Court of the state of New York certainly has jurisdiction in causes in which .stockholders charge directors with malfeasance. That such malfeasance may arise out ■of a violation of a federal statute should not deprive the state court of jurisdiction unless Congress conferred exclusive jurisdiction on the federal courts as to all rights and remedies in respect thereto.

In Underhill v. Schenck, 238 N. Y. 7, 143 N. E. 773, 775, 33 A. L. R. 303, the court said: “If the same act is not merely an invasion of the statutory right of property, but is also the breach of a contract or the abuse of a relation, he may count upon the breach or the abuse, and have relief accordingly. When this is the ground of action, the courts of the state are not shorn- of their •competence.

I conclude, therefore, that the state court .had jurisdiction over the subject-matter of this suit.

However, now that the issues are in .the federal court, it is proper to emphasize that provision of the Clayton Act (title 15, U. S. Code, § 21 [15 USCA § 21]), which would enable the Pennsylvania Railroad Company to obtain a review in a Circuit Court of Appeals from the order of the Interstate Commerce Commission set forth in the complaint. If it should subsequently appear in the cause pending in this court that the defendant Pennsylvania Railroad Company, or indeed any of the defendants, are seeking or shall seek such a review in a Circuit Court of Appeals, it would seem proper to stay this cause pending a final determination of such order.

A second point urged by the railroad company is that the state court obtained no jurisdiction over it for the purposes of the suit. Reliance is had on Louisville & Nashville R. Co. v. Chatters, 279 U. S. 320, 49 S. Ct. 329, 330, 73 L. Ed. 711, in which it was said: “Even when present and amenable to suit it may not, unless it has consented (Pennsylvania Fire Ins. Co. v. Gold Issue Mining Co., 243 U. S. 93, 37 S. Ct. 344, 61 L. Ed. 610; Smolik v. Phila. & Reading Coal Co. [D. C.] 222 P. 148), be sued on transitory causes of action arising elsewhere which are unconnected with any corporate action by it within the jurisdiction (Old Wayne Mut. Life Ass’n v. McDonough, 204 U. S. 8, 27 S. Ct. 236, 51 L. Ed. 345; Simon v. Southern Ry. Co., 236 U. S. 115, 35 S. Ct. 255, 59 L. Ed. 492).”

That case certainly-would be applicable, as would also Guerin Mills, Inc., v. Barrett, 254 N. Y. 380,173 N. E. 553, if from the face of the complaint it appeared that the transactions complained of were unconnected with any corporate action taken by it within the state of New York. A reading of the complaint-, however, reveals no allegation made as to where the alleged illegal acts were committed.

The motion must therefore be denied. Settle order on notice.


author: VAUGHT, District Judge.

text:
    HEFFERNAN v. ALEXANDER, Collector of Internal Revenue.
    No. 3896.
    District Court, W. D. Oklahoma.
    Feb. 23, 1931.

      Douglas, Armitage & McCann, of New York City, and Paul E. Bradley, of Joplin, Mo. (Harry W. Blair, of Joplin, .Mo., of' counsel), for plaintiff.
    Roy St. Lewis, U. S. Dist. Atty., and Fred A. Wagoner, Asst. U. S. Dist. Atty., both of Oklahoma City, Okla., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue,, and Henry C. Clark, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for defendant.
   VAUGHT, District Judge.

The plaintiff brings this action against the defendant for the recovery of a certain sum allowed by the Commissioner of Internal Revenue as refund on taxes paid for the year 1917. It appears from the stipulation of facts filed herein that the plaintiff, John B. Heffernan, was a British subject and living in the province of Quebec, Canada; that during the year 1917, the plaintiff and .one O. L.. Henault, also a British subject, were copartners under the partnership name of Montreal Mining Company, engaged in the business of mining zinc and lead in the state of Oklahoma; that all of the income of the plaintiff from sources within the-United States for the year 1917 was derived from the business of said partnership, and that on April 11, 1918, plaintiff filed an individual excess profits tax return, form 1101, showing a net income of $169,550.65, and an excess profits tax of $29,-355.19; that on the same date he filed his individual income tax return, form 1040, showing a net income subject to normal and sur taxes of $140,195.46, being $169,550.65 less $29,355.19, and an income tax of $28,640.57, or a total income and excess profits tax of $57,995.76, which, said sum was paid by the plaintiff on or before June 15, 1918, to the defendant’s predecessor in office at Oklahoma City, who transmitted same to the Treasurer of the United States in the regular course of business. On July 22, 1921, the collector of internal revenue for the district of Oklahoma, filed an excess profits tax return on behalf of the partnership, Montreal Mining Company, and no other separate return of income and profits on the forms required by the regulations of the department was ever filed by or on behalf of said partnership.

The Commissioner of Internal Revenue determined that plaintiff’s correct tax liability for the year 1917 was $15,587.59, and that said plaintiff had overpaid his individual taxes by the sum of $42,408.17. On February 27,1923, plaintiff filed a claim for refund for said overpayment of $42,408.17, and on June 26,1926, the Commissioner of Internal Revenue mailed to plaintiff a certificate of over-assessment for the amount of said claim, and said overassessment was allowed on schedule No. 22349, dated October 5, 1926. Upon information and facts submitted to him, the Commissioner determined that the taxable income of the Montreal Mining Company subject to excess profits taxes was $316,859.22, and that the excess profit taxes due thereon were $122,339.34. The Commissioner notified the Montreal Mining Company of such determination by letter dated November 15, 1921, and on January 3, 1922, the Commissioner of Internal Revenue assessed against said partnership excess profit taxes in the' amount of $122,339.34. On November 22, 1922, the said Montreal Mining Company filed a claim for the abatement of said assessment, said claim was rejected by the Commissioner of Internal Revenue on schedule No. 7770, dated October 2, 1926.

Upon information and facts submitted to him, the Commissioner of Internal Revenue, during October, 1926, determined and assessed against O. L. Henault, plaintiff’s partner in said Montreal Mining Company, income taxes for the year 1917 in the sum of $15,587.59, plus $560.94 interest, or a total of $16,148.52, and on December 28, 1926, at the written request of the plaintiff and O. L. Henault, the defendant herein credited the account of O. L. Henault with the sum of $16,-148.53, and deducted the same from the over-assessment in favor of the plaintiff. Thereafter, on March 5, 1927, a treasury cheek in the amount of $26,259.64, being the balance of the overassessment in favor of the plaintiff, plus $13,258.55 interest, or a total of $39,517.19, was forwarded to the defendant, ■and upon receipt of said cheek it was discovered by the defendant that the records of the defendant showed the above-mentioned assessment of $122,339.34, excess profit taxes against the partnership, Montreal Mining Company, no part of which had been paid, and on May 5, 1927, the defendant was instructed by the Commissioner of Internal Revenue to return said treasury cheek to the Treasury Department as a repayment to the appropriation from which drawn, and on the 9th of May, 1927, the defendant, in compliance with said request, returned said Treasury cheek to the Commissioner of Internal Revenue, and on the 17th day of May, 1927, the Commissioner of Internal Revenue' authorized and directed the defendant to apply said balance on the overassessment in favor of the plaintiff, to wit, $26,259.64 against the outstanding unpaid assessment of $122,339.-34, then due from the Montreal Mining Company, a partnership, and on May 21, 1927, this defendant complied with the directions of the Commissioner of Internal Revenue, and, after crediting the account of the Montreal Mining Company with the amount of $26,259.64 as aforesaid, interest was computed on the latter amount and allowed in the sum of $172.69, which was likewise credited against the balance of $96,079.70 shown as due from said partnership. There is still outstanding and unpaid on the records of the Collector of Internal Revenue the sum of $95,307.01 due from the Montreal Mining Company. The said Montreal Mining Company ceased doing business during the year 1922, and thereafter liquidated. On November 21, 1927, the Commissioner mailed a deficiency letter to the plaintiff herein from which an appeal has been taken, and is now pending before the United States Board of Tax Appeals. And on the same date, a letter identical with the letter above referred to was mailed to O. L. Henault, who likewise appealed to the Board of Tax Appeals. On or about December 10,1926, the Montreal Mining Company filed .with the defendant Collector of Internal Revenue an offer in compromise of its partnership excess profits taxes in which there was tendered the sum of $12,500 in settlement of the taxes theretofore assessed against said partnership, and on February 7, 1927, the plaintiff filed with the defendant a supplemental offer in comprom- . ise in which he tendered the sum of $12,500, in addition to the amount previously tendered, making a total offer' of $25,000, which said offer in compromise was rejected by the Commissioner of Internal Revenue on Mareh 29, 1927, and on July 15, 1927, the sum of $25,000 was refunded on account of the rejection of said offer. This action, therefore, is brought against the Commissioner of Internal Revenue at Oklahoma City, and prays for judgment in the sum of $39,517.19, being the amount of the refund heretofore determined in favor of the plaintiff plus interest thereon, together with the costs of this action.

The plaintiff in his brief says:

(1) That the Department, having established the practice of keeping the partnership and the individual entirely separate and distinct, should not now depart from that practice for the purpose of acquiring more taxes.

(2) That the refund in favor of the plaintiff was granted and paid long after the tax against which it was subsequently applied was outlawed and extinguished.

(3) That the partnership excess profits tax was barred July 21,1926, five years after, the return was filed.

(4) The refund having been made a part of the offer in compromise, it should have been returned on the rejection of the offer of compromise.

(5) A claim for refund having been filed with the Commissioner, and having been paid by the Treasury Department, no further claims were required.

(6) A proper claim for refund has been filed in this ease sufficient to sustain the suit.

The defendant in his brief contends:

(1) That this action was commenced after the expiration of the statutory period for suit, and therefore that the action is barred.

(2) That since all sums paid by the plaintiff were paid to the predecessor of the defendant, and that since the cheek representing the amount due the plaintiff on the refund was transmitted to this defendant under instructions of his superior, the Commissioner of Internal Revenue, and since said cheek was recalled by the Commissioner of Internal Revenue, no action would lie against this defendant, either for sums paid to his predecessor or for any amounts allowed as a refund by the Commissioner of Internal Revenue, since at no- time was any portion of said funds received, paid out, or disposed of by said defendant.

(3) That the plaintiff is liable for the tax due from the partnership composed of the plaintiff and 0. L. Henault.

The contentions of both parties will be treated together. It is admitted that, when the plaintiff filed his return for the year 1917, he filed it under the misapprehension that he had the right to file his personal return showing all of the profits of the copartnership. The Revenue Act of Í917, section 1204 (1), 40 Stat. 331, amending section 8 of Revenue Act 1916, provides:

“(e) Persons carrying on business in partnership shall be liable for income tax only in their individual capacity, and the share of the profits of the partnership to which any taxable partner would be entitled if the same were divided, whether divided or otherwise, shall be returned for taxation and the tax paid under the provisions of this title.” Revenue Act of 1917.
“Sec. 201. That in addition to the taxes under existing law and under this act there shall be levied, assessed, collected, and paid for each taxable year upon the income of every corporation, partnership, or individual, a tax (hereinafter in this title referred to as the tax) equal to the following percentages of the net income.”

The act of .1917, it is admitted, “requires partnerships to make returns and gives them the privilege of selecting* their fiscal year, giving them the same privilege as is now allowed to corporations.” There can be no question then but that the partnership in this ease was liable for a tax for excess profits for the year 1917. While it is true that no return was made by the partnership as such, yet, upon the discovery that no such return had been made, the collector, as provided by the act, made a return for the partnership for the year 1917, and this return was as effective for the purpose of starting the statute of limitations running as if it had been made by the partnership itself. U. S. v. Nelson B. Updike (D. C. Neb.) 25 F.(2d) 746. If the return was filed on July 22, 1921, the collection could be made at any time within five years from that date or up until July 22, 1926. The assessment was made by the Commissioner of Internal Revenue on January 3, 1922. The collection, therefore, was not barred when the Revenue Act of 1926 was passed on February 26, 1926, and section 278 of that Act (26 USCA §§ 1058-1062a) expressly authorizes the collection of this tax within six years from the date of its assessment, subdivisions (d) and (e) of said section (26 USCA §§ 1061, 1062) being as follows:

“(d) Where the assessment of any income, excess-profits, or war-profits tax imposed By this-title or by prior Act of Congress has been made (whether before or after the enactment, of this Act) within the statutory period of limitation properly applicable thereto, such tax may be collected by distraint or by ..a proceeding in court (begun before or after the enactment of this Act), but only if begun (1) within six years after the assessment of the tax, or (2) prior to the expiration of any period for collection agreed upon in writing by the Commis-' sioner and the taxpayer.
“(e) This section shall not bar a distraint or proceeding in court begun before the enactment of the Revenue Act of 1924; nor shall it authorize the assessment of a tax or the collection thereof by distraint or by proceeding in court (1) if at the time of the enactment of this Act such assessment, distraint or proceeding -was barred by the statutory period of limitation properly applicable thereto, unless prior to the enactment of this Act the Commissioner and the taxpayer agreed in writing thereto, or (2) contrary to the provisions of subdivision (a) of section 274 of this Act.”

Section 278 of the 1926 Revenue Act has been construed in this connection in the following cases: Florsheim Drygoods Co. v. U. S., 289 U. S. 453, 50 S. Ct. 215, 74 L. Ed. 542, decided February 24th, 1930; Liberty Baking Co. v. Heiner (D. C.) 34 F.(2d) 513, affirmed (C. C. A. 3d Circuit) 37 F. (2d) 703; U. S. v. Updike (D. C.) 25 F. (2d) 746, affirmed (C. C. A. 8th Circuit) 32 F.(2d) 1, and by the Supreme Court of the United States on May 19th, 1930, 281 U. S. 489, 50 S. Ct. 367, 74 L. Ed. 984.

It appears from the foregoing act that the collection of the tax assessed against the partnership was hot barred until January 3, 1928. This, it seems, would answer contentions 2 and 3 of the plaintiff as above stated.

It is next contended by the plaintiff that, the refund having been made a part of the offer in compromise, it should have been returned on the rejection of the offer of compromise. At the time the offer of compromise was made, it is admitted in the briefs of both parties that there was an offer of $25,000 in addition to the refund due the plaintiff. In other words, the plaintiff and his partner were offering $25,000 in addition to the refund _ formerly determined in favor of the plaintiff then held by the Commissioner. There is little basis for this contention, No. 4, because the rule as established was that, if the compromise were not accepted, then the parties should be placed in exactly the same position in which they were at the time the compromise was offered. At the time the compromise was offered, the refund claimed by the plaintiff was in the hands of the government, and they did not offer that, except in so far as they waived any further claim to it. Numerous authorities are cited in the briefs, but we do not deem it necessary to cite them here.

The defendant contends that this action could not be maintained by the plaintiff for the reason it is barred by the statute of limitations. The tax was paid by the plaintiff in 1918. February 27, 1923, the plaintiff filed a claim for refund, and the claim was allowed on October 5, 1926. This assessment of the individual partners and of the partnership was so intermingled that it is difficult to consider one without the other, and, since the defendant contends that the act of 1926 gave to the government an additional year, or six years after the actual assessment in which to collect said assessment, and since the Commissioner determined an overassessment in favor of the plaintiff as of October 5, 1926, it appears that the statute of limitations would affect the claim of the government for the collection of this assessment against the partnership, and the claim of the individual for his refund, to the same effect. Therefore the contention of the defendant as to the statute of limitations is not considered favorably.

The next proposition, which is the second contention of the defendant, is whether or not this action was brought properly against the defendant. It is admitted that the defendant, A. C. Alexander, became Collector of Internal Revenue on the 1st day of March, 1923', and the only connection that he had with any funds belonging to the plaintiff was in receiving the cheek from the Commissioner of Internal Revenue, dated March 5,1927, in the sum of $39,517.19, payable to the plaintiff, but upon the receipt of the cheek his attention was called to the fact that upon the records in the defendant’s office, there was an assessment of $122,339.44 excess profits tax against the partnership which was called to the attention of the Commissioner of Internal Revenue, who thereupon by letter dated May 5, 1927,- instructed the defendant to return said treasury check to the Treasury Department, which the defendant did. At no time was he permitted to exercise his discretion or judgment as to the delivery of this check to the plaintiff, but whatever he did relative to said check he did as the agent and representative of the Commissioner of Internal Revenue. He was bound by the instructions that accompanied this cheek, and any subsequent instructions which he received from the Commissioner relative to the cheek' prior to its delivery to the plaintiff. He acted, therefore, not in a discretionary capacity, and not in the exercise of his own judgment, but under the strict instructions of the Commissioner himself. In fact, the relation existing between him and the Treasury Department was one of trust, and no higher obligation rested upon him than to obey the instructions of his superior officers.

“The basis of an action against the collector is his receipt of the tax, and if he has not received it we do not see how he can be called on to pay it back; and the fact that Lederer was the channel by which the Commissioner-transmitted the refusal to refund did not impose liability. Lederer was liable, if at all, for the tax of 1912, for this had come into his own hands; but no statute made him liable for money that was collected by his predecessor, but had never been sued for.” Philadelphia, H. & P. R. Co. v. Lederer (C. C. A.) 242 F. 492, 494.

“This action is not based upon anything that the collector of internal revenue, did, or failed to do, while in office, but is based solely upon an act of Congress for the allowance and payment of interest on sums wrongfully collected by collectors of internal revenue. This claim arising specifically under this act of Congress, we are of the opinion that the action is not properly brought against the former collector, and could be maintained only against the United States, which, by act of Congress, has provided for its payment. The act of Congress did not place upon the collector of internal revenue the duty of paying interest on sums wrongfully collected, but provided for its payment by the United States. We conclude, therefore, that this action may not be maintained against the collector in person.” Penn Smokeless Coal Co. v. Lewellyn (D. C.) 26 F.(2d) 743, 744.

See, also, Smietanka v. Indiana Steel Co. 257 U. S. 1, 42 S. Ct. 1, 66 L. Ed. 99; Union Trust Co. of San Francisco v. Wardell, 258 U. S. 537, 42 S. Ct. 393, 66 L. Ed. 753.

“Where income tax was paid without protest, and no demand was made for return prior to expiration of collector’s term of office, remedy in 'case tax not legally due had been paid was by action against the United States, and not by personal action against former collector.” Harrison et al. v. Lewellyn (D. C.) 28 F.(2d) 990.

It appears clearly to this court, from an examination of the statute.vesting jurisdiction in the various federal courts for the purpose of collecting taxes illegally or erroneously collected, that there are three types of actions possible:

(1) A suit in the United States District Court against the collector who has received the alleged illegal tax.

(2) A suit in the United States District Court against the United States for the amount collected.

(3) A claim in the nature of a suit prosecuted in the United States Court of Claims.

The various limitations affecting either one of the foregoing are easily discernible from the statute itself. See USCA title 28, § 41, par. 26.

There is, therefore, a. serious question in the mind of this court whether or not this action could be maintained against the defendant, Alexander. Most certainly no personal liability could attach to him, but since to decide this question would make a decision of any of the other questions unnecessary, and since, if an appellate court should determine that the defendant Alexander is

a proper party defendant, and that therefore the action is properly brought, another trial of the ease on the other questions would be necessary, the court deems it advisable to withhold any formal decision on this question other than an expression of his opinion, and to proceed with the decision of all the questions involved so that all matters involved in this case may be properly presented to the appellate court.

The last question submitted is the third contention above of the defendant that the plaintiff is actually liable for the tax due to the partnership composed of himself and 0. L. Henault. The evidence in this case discloses that this partnership was dissolved in 1923, and the assets of the partnership divided between plaintiff and his copartner. The evidence furthermore shows that both of the partners were British subjects and residents of the province of Quebec, Canada, and therefore aliens, and there is no evidence that any property whatever existed at the time this assessment against the partnership was made belonging to the partnership proper. Whatever property existed was in the hands of the copartners, as individuals. Now if this plaintiff as a partner is liable for the partnership debts and the taxes assessed against the partnership, and the government has moneys belonging to said plaintiff, and the partnership is indebted to the government for taxes, has the government the right to apply any sums in its hands belonging to the plaintiff‘as one of the copartners to the partnership indebtedness?

Assuming for the .sake of argument that the plaintiff having had a refund determined in his favor for 1917, and that he was indebted to the government for an unpaid tax assessed for the latter year, say for 1920, would the government, at the time the refund was determined in 1926, have the right to apply the refund to the unpaid taxes? There can be no question as to this. The Supreme Court of the United States in Francis v. McNeal, 228 U. S. 695, 33 S. Ct. 701, 702, 57 L. Ed. 1029, L. R. A. 1915E, 706, says: “But the fact remains as true as ever that partnership debts are debts of the members of the firm, and that the individual liability of the members is not collateral like that of a surety, put primary and direct, whatever priorities there may be in the marshaling of assets. The nature of the liability is determined by the common law.” See, also, Lewis v. U. S., 92 U. S. 618, 23 L. Ed. 513.

The court, therefore, concludes:

(1) That the assessment against the partnership made on January 3, 1922, in the sum of $122,339.34, was a valid and legal assessment.

(2) The collection of said tax by the government was not barred by the statute until six years from January 3, 1922, or January 3, 1928.

(3) That the offer of compromise which was rejected by the government did not at the time, and does not now, affect the legal status of the parties with reference to the collection of the tax against the partnership or the payment of the amount to the plaintiff due under the refund.

(4) The partnership having been dissolved in 1922, and its assets distributed, and at the time of the filing of this action said partnership tax remaining due and unpaid, and the government having in its possession the sum allowed to the plaintiff as a refund on the 1917 taxes, and said partnership tax being a liability against the individual partners, that the government had the legal right to apply said sum due the plaintiff on the refund to the payment of said tax due from the partnership.

(5) As above stated, the court is of the opinion that this action is not properly brought against the defendant, A. C. Alexander, as under the pleadings and the stipulation of facts the action should have been brought against the United States, but the court does not formally decide this question for the reasons hereinbefore stated.

(6) The court finds generally for the defendant.

Judgment is therefore rendered for the defendant, and for. the costs of this action.