text:
    BOEING AIR TRANSPORT, Inc., v. EDEL-MAN, State Treasurer, et al.
    No. 2049.
    District Court, D. Wyoming.
    June 27, 1931.
    John W. Lacey of Cheyenne, Wyo., for plaintiff.
    James A. Greenwood, Atty. Gen., and Richard J. Jackson, George W. Ferguson, and Philip S. Garbutt, Asst. Attys. Gen., for defendant State Treasurer.
    Harry B. Henderson, Jr., of Cheyenne, Wyo., for defendant City of Cheyenne.
    T. S. Taliaferro, Jr., and F. W. Johnson, both of Rock Springs, Wyo., for defendant City of Rock Springs.
   KENNEDY, District Judge.

This is a suit in equity in which the plaintiff seeks to restrain the enforcement of a state law in regard to the collection of a gasoline tax upon the gasoline used by the plaintiff in its operation of an air line in interstate commerce in connection with the use of airports at the cities of Cheyenne and Rock Springs in the state of Wyoming. The prayer of the bill seeks an interlocutory injunction and upon final hearing a permanent injunction against the collection of such tax.

The set-up of the case is one which would seem to bring it within the purview of a statutory court of three judges (28 TTSCA § 380), but, as no action was taken by the plaintiff to move for a hearing upon an interlocutory injunction, the case proceeded to final hearing before a single judge without objection on the part of the defendants, and we assume therefore that the court has jurisdiction of the proceeding. Seaboard Air Line Railway v. Railroad Commission, 213 F. 27 (C. C. A. 5).

The substance of t)ie statutory enactment challenged by the plaintiff as being unconstitutional in regard to the interstate business of the plaintiff is found in chapter 14 of the Session Laws of Wyoming 1929; Special Session, reading as follows: “Ota and after April 1, 1929, each and every wholesaler as defined in this Act, who is now engaged or who may hereafter engage in his own name,' or in the name of others, or in the name of his representatives or agents in this State, in the sale or use of gasoline as herein defined shall not later than the fifteenth of each month, render to the State Treasurer a statement of all gasoline sold or used by them in the State of Wyoming during the preceding calendar month, and pay to the State Treasurer at the same time, the license tax of four cents per gallon on all such gasoline. Said statement to the State Treasurer shall be upon blanks furnished by him, and shall be sworn to by the owner or managing agent in the ease of an individual, firm or association, by the resident general agent or attorney, in the ease of a foreign corporation or by one of the principal officers in the ease of a domestic corporation. Every person, firm or corporation, who shall use any gasoline in this state upon which the said tax has not been paid by any wholesaler in this state, shall, on or before the 15th day of each calendar month, beginning with the first calendar month after this Act has become effective, render a true statement to the State Treasurer, duly signed and sworn to, and accompany such statement with the payment of a tax of four cents per gallon on all gasoline as shown by such statement to have been used by him; provided that before making the distribution of funds provided for in Section 1 hereof the State Treasurer shall pay over all funds received from the gasoline license tax on gasoline used at any municipal air field to the city or town where such air field is located, to be used for the maintenance and improvement of such air field.”

Upon the final hearing testimony was adduced by the parties, and the following may be considered as a sketchy outline of the f aets in the case:

The plaintiff is a corporation organized and existing under the laws of the state of Washington and engaged in the operation of an air transport line upon regular schedule between Chicago, Illinois, and San Francisco, Cal. In such operation it enjoys a contract with the United States government in the transportation of United States mails, and likewise transports passengers and express •for hire over its entire line. The substantial portion of its business is interstate, in fact the testimony sho.ws that its transportation of mails, passengers, or express within the state of Wyoming is an insignificant percentage of its entire business, so that it would be impractical and impossible to determine or estimate the relative amount of gasoline Which would be consumed in carrying on its intrastate business. In the operation of its air line it makes use of two landing fields owned by the defendant cities of Cheyenne and Rock Springs, respectively, at which points its planes are regularly landed on schedule for the discharge and reception of mail, passengers, and express. At these points its planes are refueled, .examined, and conditioned. Some time after the passage and operation of the law which the plaintiff challenges, it began a segregation of the gasoline used by it by tolling the amount of such gasoline which was used for the operation of its ships, traveling in interstate commerce, as distinguished from the gasoline which was used 'in the testing of airships at the field, conditioning its motors, and sales made to other airplane users. As to the first-mentioned gasoline, the tax of 4 cents per gallon was paid to the state treasurer under protest in consideration of the high penalties fixed for a violation of the statute, but as to the latter classification of gasoline the said tax was paid thereon to the state treasurer without protest. During the period covering substantially eight months, from the I5th of March, 1930, to the 15th of November, 1930, the plaintiff paid to the state treasurer, in the amount of this protested tax, the sum of $5>-529.28, representing the tax upon gasoline used in interstate commerce at the Cheyenne field, and during the same period it paid to the state treasurer $2,726.32 as representing the tax upon 'gasoline used in interstate commerce at the Rock Springs field. Testimony was likewise offered as to the continuing payments of said protested and unprotested amounts after the filing of the bill and substantially up to the final hearing. The amount testified to as having been paid of the unprotested tax is considerably that Paid « the protested tax at í30^ aborts. The city of Cheyenne entered lnto a eontraf with the plamtiff company f^mie ln the year of 1929 which provided f°r o£ the mumeipalair field by the pbuntiff m the operation of its transconti?ental air lme' The Provisions of such contract f™ numerous, and not all of them are material to the matter here being considered Among other provisions of the contract, it m3,Y be said £ba£ £be plamtiff and the city were to share the expense of grading additmnal land and building a new outlining ^tmg 3ystem at a cost of $7,000. The city a°rees to acquire additional land for the air-P01't f°r which it should pay the expense, and that {t should keeP *he field during the term of the lease (designated as twenty-five years) a3 a well-maintained and well-regulated air-PIane landlnS ñeId for the reasonable use of any and ad Planes and airships operated by the plaintiff. In addition, the plaintiff agrees to Pay the city an annual rental of $1,050 for hanSar sPace and taxiways, and $3,000 for rental of several hangars located on the field and owned by the city. The city agrees to Pay the plaintiff $2,400 a year for the genera^ supervision of the field, under the general direction of the city. Similar contract relaturns exist between the plaintiff and the city °f ftock Springs, but of less magnitude owing to the smaller business of the company at that P°mt, but involving a rental there paid by the plaintiff of $609 per year. At both ports the plaintiff has the privilege of selling gasoIme to the public for airplane purposes. As to the city of Cheyenne, the money received £rom the state treasurer representing this tax on gasoline used at the airport is placed in an alrPort £and and used exclusively for the Purpose of improving and maintaining the airfield- DurmS the _ year last past not all o£ the money so received and maintained in thls separate fund had been expended, but all o£ which had been expended was expended in connection with the airport. No direct testimony was o£fered by tlle elty o£ a°ck Springs as to its segregation of this money received £rom the state treasurer, except as it may be iufen-ed that the general purpose of the law would be earned out by that municipality. In Cheyenne, at a recent popular election, a bond issae was voted upon and approved by the PeoPle authorizing the expenditure of $15-000 for vanous Puposos m connection Wltb the ^proving of its municipal air field,

Under these circumstances the plaintiff contends that the law requiring the payment of the tax of 4 cents per gallon so segregated and used by it in the operation of its air line in interstate commerce is unconstitutional as applied to the plaintiff, in that it is in direct contravention of the commerce clause of the Constitution. Counsel in such contention rely principally upon the case of Helson v. Kentucky, 279 U. S. 245, 49 S. Ct. 279, 73 L. Ed. 683, where the state of Kentucky attempted to tax 75 per cent, of the gasoline consumed within the limits of Kentucky by a ferryboat operating exclusively in interstate commerce. The court, through Mr. Justice Sutherland, at page 248 of 279 U. S., 49 S. Ct. 279, 280, expresses the gist of the decision in the following language:

“The claim under the commerce clause of the federal Constitution was denied on the ground that the tax was confined to gasoline used within the limits of the state and the commerce clause was not affected. It is with the latter question only that we are here concerned.
“Regulation of interstate and foreign commerce is a matter committed exclusively to the control of Congress, and the rule is settled by innumerable decisions of this court, unnecessary to be cited that a state law which directly burdens such commerce by taxation or otherwise constitutes,a regulation beyond the power of the state under the Constitution. * * * The power vested in Congress to regulate commerce embraces within its control all the instrumentalities by which that commerce may be carried on. Gloucester Ferry Co. v. Pennsylvania, supra, 114 U. S. page 204, 5 S. Ct. 826, 29 L. Ed. 158. A state cannot, ‘lay a tax on interstate commerce in any form, whether by way of duties laid on the transportation of the subjects of that commerce, or on the receipts derived from that transportation, or on the occupation or business of carrying it on.’ Leloup v. Port of Mobile, 127 U. S. 649, 648, 8 S. Ct. 1380, 1384, 32 L. Ed. 311; Lyng v. Michigan, 135 U. S. 161, 166, 10 S. Ct. 725, 34 L. Ed. 150; Ozark Pipe Line v. Monier, 266 U. S. 555, 562, 45 S. Ct. 184, 69 L. Ed. 439. While a state has power to tax property having a situs within its limits, whether employed in interstate commerce or not, it cannot interfere with interstate commerce through the imposition of a tax which is, in effect, a' tax for the privilege of transacting such commerce. Adams Express Company v. Ohio, 166 U. S. 185, 218, 17 S. Ct. 604, 41 L. Ed., 965.”

Later in the decision, at page 252 of 279, U. S., 49 S. Ct. 279, 281, the following language is used: “The statute here assailed clearly comes within the principle of these and numerous other decisions of like character which might be added. The tax is exacted as the price of the privilege of using an instrumentality of interstate commerce. It reasonably cannot be distinguished from a tax for using a locomotive or a ear employed in such commerce. A tax laid upon the use of the ferryboat would present an exact parallel. And is not the fuel consumed in propelling the boat an instrumentality of commerce no less than the boat itself? A tax which falls directly upon the use of one of the means by which commerce is carried on directly burdens that commerce. If a tax cannot be laid by a state upon the interstate transportation of the subjects of commerce, as this Court definitely has held, it is little more than repetition to say that such a tax cannot be laid upon the use of a medium by which such transportation is effected. ‘All restraints by exactions in the form of taxes upon such transportation, or upon acts necessary to its completion, are so many invasions of the exclusive power of Congress to regulate that portion of commerce between the states.’ Gloucester Ferry Co. v. Pennsylvania, supra, 114 U. S. p. 214, 5 S. Ct. 833 [29 L. Ed. 158].”

In U. S. Airways v. Shaw (D. C.) 43 F.(2d) 148, a statutory court in the Tenth Circuit sitting in the Western district of Oklahoma decided a case similar in many respects to the ease at bar, by declaring the statute invalid. The substance of the decision is fairly set forth in paragraphs 1 and 2 of the syllabus, which read as follows:

“State statute levying excise tax on gasoline held invalid as interference with interstate commerce as applied to air transportation companies engaged in interstate transportation business (Const. art. 1, § 8, el. 3; Laws Okl. 1923, c. 239, as amended by Laws 1923-24, c. 101, Laws 1925, e. 198, and Laws 1929 [Sp. Sess.] cc. 278, 279).
“Complaining parties are engaged in the transportation by airplane of passengers, freight, express, and mail from points outside to points within the state and vice versa. Gasoline used as motor power in airplanes in question is purchased largely within state, and tax in question is paid through consignees and distributors of gasoline.
“Intrastate operation of air transportation company held interdependent with, interstate commerce, rendering gasoline used in intrastate business not subject to excise tax (Const, art. 1, § 8, el. 3; Laws Old. 1923, e. 239, as amended by Laws 1923-24, e. 101, Laws 1925, e. 198, and Laws 1929 [Sp. Sess.] cc. 278, 279).
“Airway companies engaged in interstate transportation business carrying passengers, freight, express, and mail from points outside to points within state, and vice versa, conducted a like intrastate transportation business without which interstate .transportation business could not be efficiently and economically conducted.”

Later a statutory court again in the Tenth Circuit, sitting in the district of New Mexico, rendered a similar decision in Mid-Continent Air Express Corp. v. Lujan (D. C.) 47 F.(2d) 266, holding that a tax upon gasoline used by a transport corporation in interstate commerce, where it was likewise engaged in intrastate commerce and incidental to the former, made the entire tax bad. The gist of tile decision is fairly suggested in the second paragraph of the syllabus reading as follows:

“Excise tax upon all gasoline used by air transport corporation engaged in interstate commerce and intrastate commerce incidental thereto held direct, burden on interstate commerce, and therefore invalid (Comp. St. N. M. 1929, §§ 60-101, 60-203).
“Air transport corporation operated from point in Texas through state of New Mexico to point in Colorado, and engaged in transporting passengers, freight, and express for hire. It also carried on intrastate business, but such business was merely incidental to interstate business. Two classes of business were so interdependent and so commingled, both with reference to receipts and expenses, that amount of gasoline used in each could not be determined and apportioned.”

It is not contended that the entire tax on gasoline used at the airports in this ease is invalid, for the reason that it is capable of segregation and actually has been segregated as to its use in interstate commerce and intrastate commerce, and only the enforcement of the law which purports to levy and collect the tax upon gasoline used in interstate commerce is challenged.

Were the situation in the case at bar in all respects analogous to the cases last cited, it would require no further comment from this court as to those decisions ruling this case, especially in view of the fact that three of the distinguished present Circuit Judges (Cotteral, Phillips, and McDermott) of the Tenth Circuit sat upon the statutory courts.. But there is another angle of the ease which makes it less clear to me on account of a peculiar feature of the statute in question. The last paragraph of the statute provides, in substance, that the tax received from gasoline used at any municipal airfield be paid by the state treasurer receiving the same to the city where such airfield is located to be used for the maintenance and improvement of such field. The query in the mind of the court is as to whether or not this does not bring the statute in question within the scope of another line of eases presenting a different feature of the law. The thought can be best expressed by a reference to some of these. In Hendrick v. Maryland, 235 U. S. 610, 35 S. Ct. 140, 59 L. Ed. 385, which is a ease concerning a graduated license fee on motor vehicles engaged in interstate commerce, Mr. Justice McReynolds, in speaking for the court at page 623-624 of 235 U. S., 35 S. Ct. 140,142, says: “In view of the many decisions of this court there can be no serious doubt that where a state at its own expense furnishes special facilities for the use of those engaged in commerce, interstate as well as domestic, it may exact compensation therefor. The amount of the charges and the method of collection are primarily for determination by the state itself; and so long as they are reasonable and axe fixed according to some uniform, fair, and practical standard, they constitute no burden on interstate commerce. Transportation Co. v. Parkersburg, 107 U. S. 691, 699, 2 S. Ct. 732, 27 L. Ed. 584, 587; Huse v. Glover, 119 U. S. 543, 548, 549, 7 S. Ct. 313, 30 L. Ed. 487, 490; Monongahela Navigation Co. v. United States, 148 U. S. 312, 329, 330, 13 S. Ct. 622, 37 L. Ed. 463, 469; Minnesota Rate Cases, 230 U. S. 352, 405, 33 S. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18, and authorities cited. The action of the state must he treated as correct unless the contrary is made to appear. In the instant case there, is no evidence concerning the value of the facilities supplied by the state, the cost of maintaining them, or the fairness of the methods adopted for collecting the charges imposed; and we cannot say from a mere inspection of the statute that its provisions are arbitrary or unreasonable.”

In Postal Telegraph Cable Company v. City of Richmond, 249 U. S. 252, 39 S. Ct. 265, 63 L. Ed. 590, involving a tax to be paid by a telegraph company engaged in interstate and intrastate business, Mr. Justice Clarke at pages 259-260 of 249 U. S., 39 S. Ct. 265, 266, says: “Even if the net returns from the intrastate business should not equal such tax, and it must be paid from interstate earnings, this alone would not be conclusive against its validity. If the method of doing interstate business necessarily imposes duties and liabilities upon a municipality, it may not be charged with the cost of these without just •compensation. Even interstate business must pay its way—in this ease for its right of way and the expense to others incident to the use of it. St. Louis v. Western Union Telegraph Co., 148 U. S. supra, pages 98 et seq., 13 S. Ct. 485, 37 L. Ed. 380; Atlantic & Pacific Telegraph Co. v. Philadelphia, 190 U. S. 160, 163, 23 S. Ct. 817, 47 L. Ed. 995; St. Louis v. Western Union Telegraph Co., 149 U. S. 465, 13 S. Ct. 990, 37 L. Ed. 810. Such compensation should also include the expense of inspection of the poles and wires used, and of such supervision of the business of the company conducted in the streets as may be reasonably necessary to secure the safety of life and property of the inhabitants and of the users of the streets; but with the authority in the courts, on proper application, to determine whether, under the conditions prevailing in a given case, the charge made is reasonably proportionate to the service to be rendered and the liabilities involved, or whether it is a disguised attempt to impose a burden on interstate commerce. St. Louis v. Western Union Telegraph Co., 148 U. S. 92, 13 S. Ct. 485, 37 L. Ed. 380; St. Louis v. Western Union Telegraph Co., 149 U. S. 465, 13 S. Ct. 990, 37 L. Ed. 810; Postal Telegraph-Cable Co. v. Baltimore, 156 U. S. 210, 15 S. Ct. 356, 39 L. Ed. 399; Atlantic & Pacific Telegraph Co. v. Philadelphia, 190 U. S. 160, 163, 23 S. Ct. 817, 47 L. Ed. 995; Western Union Telegraph Co. v. Pennsylvania R. R. Co., 195 U. S. 540, 566, 25 S. Ct. 133, 49 L. Ed. 312, 1 Ann. Cas. 517; Western Union Telegraph Co. v. Richmond, 224 U. S. 160, 169, 32 S. Ct. 449, 56 L. Ed. 710,”

In Kane v. State of New Jersey, 242 U. S. 160, 37 S. Ct. 30, 61 L. Ed. 222, involving the registration fee of vehicles of nonresidents moving in interstate commerce, a paragraph of the syllabus reads as follows: “As _ applied to vehicles of nonresidents moving in interstate commerce as well as to vehicles of residents, the amount of the registration fee may properly be based not only on the cost of inspection and regulation, but also on the cost of maintaining improved roads.”

In Clark v. Poor, 274 U. S. 554, at pages 556-557, 47 S. Ct. 702, 703, 71 L. Ed. 1199, Mr. Justice Brandéis, in discussing a tax upon motor vehicles operating as common carriers exclusively in interstate commerce, says: “The plaintiffs claim that, as applied to them, the act violates the commerce clause of the federal Constitution. They insist that, as they are engaged exclusively in interstate commerce, they are not subject to regulation by the state; that it is without power to require that before using its highways they apply for and obtain a certificate; and that it is also without power to impose, in addition to the annual license fee demanded of all persons using automobiles on the highways, a tax upon them, under section 614-94, for the maintenance and repair of the highways and for the administration and enforcement of the laws governing'the use of the s'ame. The contrary is settled. The highways are public property. Users of them, although engaged exclusively in interstate commerce, are subject to regulation by the state to ensure safety and convenience and the conservation of the highways. Morris v. Duby, 274 U. S. page 135, 47 S. Ct. 548, 71 L. Ed. 966; Hess v. Pawloski, 274 U. S. p. 352, 47 S. Ct. 632, 71 L. Ed. 1091. Users of them, although engaged exclusively in interstate commerce, may be required to contribute to their cost and upkeep. Common carriers for hire, who make the highways their place of business, may properly be charged an extra tax for such use. Hendrick v. Maryland, 235 U. S. 610, 35 S. Ct. 140, 59 L. Ed. 385; Kane v. New Jersey, 242 U. S. 160, 37 S. Ct. 30, 61 L. Ed. 222. Compare Packard v. Banton, 264 U. S. 140, 144, 44 S. Ct. 257, 68 L. Ed. 596.”

Later the same justice in Sprout v. City of South Bend, 277 U. S. 163, at page 169, 48 S. Ct. 502, 504, 72 L. Ed. 833, 62 A. L. R. 45, in discussing a license fee imposed upon those engaged in interstate commerce, says: “It is true that, in the absence of federal legislation covering the subject, the state may impose, even upon vehicles using the highways exclusively in interstate commerce, non-diseriminatory regulations for the purpose of insuring the publie safety and convenience; that licensing or registration of busses in a measure appropriate to that end; and that a license fee no larger in amount than is reasonably required to defray the expense of administering the regulations may be demanded. Hendrick v. Maryland, 235 U. S. 610, 622, 35 S. Ct. 140, 59 L. Ed. 385; Kane v. New Jersey, 242 U. S. 160, 37 S. Ct. 30, 61 L. Ed. 222; Morris v. Duby, 274 U. S. 135, 47 S. Ct. 548, 71 L. Ed. 966; Clark v. Poor, 274 U. S. 554, 47 S. Ct. 702, 71 L. Ed. 1199. Comparo Hess v. Pawloski, 274 U. S. 352, 47 S. Ct. 632, 71 L. Ed. 1091. These powers may also he exercised by a city if authorized to do so by appropriate legislation. Compare Erb v. Morasch, 177 U. S. 584, 585, 20 S. Ct. 819, 44 L. Ed. 897; Mackay Telegraph Co. v. Little Rock, 250 U. S. 94, 99, 39 S. Ct. 428, 63 L. Ed. 863. Sueh regulations rest for their validity upon the same basis as do state inspection laws, Patapsco Guano Co. v. Board of Agriculture, 171 U. S. 345, 18 S. Ct. 862, 43 L. Ed. 191; Red ‘C’ Oil Co. v. Board of Agriculture, 222 U. S. 380, 32 S. Ct. 152, 56 L. Ed. 240, and municipal ordinances imposing on telegraph companies, though engaged in interstate commerce, a tax to defray the expense incident to the inspection of poles and wires. Western Union Telegraph Co. v. New Hope, 187 U. S. 419, 23 S. Ct. 204, 47 L. Ed. 240; Postal Telegraph-Cable Co. v. Richmond, 249 U. S. 252, 258, 39 S. Ct. 265, 63 L. Ed. 590; Mackay Telegraph Co. v. Little Rock, 250 U. S. 94, 99, 39 S. Ct. 428, 63 L. Ed. 863.”

The most recent pronouncement of the high court called to my attention is that found in Interstate Transit Co., Inc., v. Dick Lindsey, 283 U. S. 183, 51 S. Ct. 380, 381, 75 L. Ed. 953, decided April 13, 1931. In that case a tax imposed by the state of Tennessee on busses engaged in interstate commerce was held unconstitutional. The basis of the decision, however, is the fact that the Tennessee statute was upon its face not enacted for any purpose looking to the construction and maintenance of the state highways, but was merely a privilege tax for the carrying on of interstate business. The pertinent portion of the opinion setting forth legal principles which may be said to apply to the ease at bar is as follows: “While a state may not lay a tax on the privilege of engaging in interstate commerce, Sprout v. South Bend, 277 U. S. 163, 48 S. Ct. 502, 72 L. Ed. 833, 62 A. L. R. 45, it may impose even upon motor vehicles engaged exclusively in interstate commerce a charge, as compensation for the uso of the public highways, which is a fair contribution-to the cost of constructing and maintaining them and of regulating the traffic thereon. Kane v. New Jersey, 242 U. S. 160, 168, 169, 37 S. Ct. 30, 61 L. Ed. 222; Clark v. Poor, 274 U. S. 554, 47 S. Ct. 702, 71 L. Ed. 1199; Sprout v. South Bend, supra, 277 U. S. pages 169, 170, 48 S. Ct. 502. As such a charge is a direct burden on interstate commerce, the tax cannot be sustained unless it appears affirmatively, in some way, that it is levied only as compensation for use of the highways or to defray the expense of regulating motor traffic. This may be indicated by the nature of the imposition, sueh as a mileage tax directly proportioned to the use, Interstate Busses Corp. v. Blodgett, 276 U. S. 245, 48 S. Ct. 230, 72 L. Ed. 551, or by the express allocation of the proceeds of the tax to highway purposes, as in Clark v. Poor, supra, or.otherwise. Where it is shown that the tax is so imposed, it will be sustained unless the taxpayer shows that it bears no reasonable relation to the privilege of using the highways or is discriminatory. Hendrick v. Maryland, 235 U. S. 610, 612, 35 S. Ct. 140, 59 L. Ed. 385; Interstate Busses Corp. v. Blodgett, 276 U. S. 245, 250-252, 48 S. Ct. 230, 72 L. Ed. 551. Compare Interstate Busses Corp. v. Holyoke Street Ry., 273 U. S. 45, 51, 47 S. Ct. 298, 71 L. Ed. 530. But the mere fact that the tax falls upon one ■who uses the highway is not enough to give it presumptive validity.”

Applying the principle of these decisions to the facts and the statute in the ease at bar, it seems to me, it falls within sueh principle and must be ruled accordingly. Certainly there cannot be said to be substantial distinction, because in the ease at bar the tax is not assessed by the municipality, but is assessed under a state law and later turned over to the municipality for the particular use designated. The result to the plaintiff is, of course, the same. Here, the tax on the gasoline used by the plaintiff in interstate commerce is returned directly to the municipality for the maintenance and improvements of the air fields which the plaintiff is using and in the end results in a benefit to the plaintiff. Under the logic of the decisions above cited, even interstate commerce must assist in paying its own way. The evidence in the case shows beyond peradventure that the much greater portion of the airplane traffic at these municipal ports is that of plaintiff in the operation of its interstate planes. Presumably, therefore, it would secure the greater benefit in the matter of enlargement, improvement, and maintenance of the fields at high standard. Neither can we see any way to make a substantial distinction for the purposes of the question here, between the maintenance of city streets or public highways, as discussed in the Supreme Court eases, and an airplane landing field open to all planes for general use. The facility of good operating conditions, although different in thé matter of use, is apparent in both.

The only limitation under such circumstances is that the tax should not he discriminatory, and that it should he no larger in amount than is reasonably necessary to carry on the legitimate purpose for which it is intended. Sprout v. South Bend, supra. As to the amount of such tax as compared with its use to the purpose's intended, it depends largely upon the judgment of the taxing authority, so long as the rule of reason is in control. Hendrick v. State of Maryland, supra. Neither is reasonableness of the tax to be measured merely by the value of the land occupied-, or the profits of the business, or by the amount expended in any particular year. Western Union Telegraph v. New Hope, 187 U. S. 419, 23 S. Ct. 204, 47 L. Ed. 240.

Considering the entire evidence in this ease, taking into account all the expenses that the municipalities have heretofore had, are having, and contemplate having in the future in the matter of improving their municipal ■airports, I am not prepared to say that the tax so challenged is not fairly commensurate with the general purposes for which it is intended. We all know that municipalities throughout the land are continually expending from time to time many thousands of dollars in acquiring, perfecting, and improving their airports in the matter of keeping pace with the great forward strides of air transportation. It seems but fair that all this should be taken into consideration in determining the issues in this case. The airports of the future must be made great terminal facilities to -accommodate this ever-increasing traffic, and any tax received and devoted exclusively to this purpose will undoubtedly in the stretch of time be inadequate to meet the reasonable demands of extension and improvement.

For the reasons stated, findings, conclusions, and a decree may be submitted, dismissing the bill at plaintiff’s cost and reserving to it proper exceptions.


source: Caselaw Access Project

author: ST. SURE, District Judge.

license: Public Domain

text:
    Ex parte AUBERT.
    No. 20627.
    District Court, N. D. California, S. D.
    June 25, 1931.
    Thos. J. Riordan, of San Francisco, Cal., for petitioner.
    Geo. J. Hatfield, U. S. Atty., of San Francisco, Cal., for respondent.
   ST. SURE, District Judge.

Petition for writ of habeas corpus.

On September 19, 1929, the petitioner, then incarcerated in the state penitentiary at San Quentin upon a commitment issued out of -a state court, was brought before this court upon a writ of habeas corpus ad prosequen-dum, and tried and convicted by a jury of violating section 37, Cr. Code U. S. (18 USCA § 88), whereupon this court sentenced him: “To be imprisoned for a period of two years in a United States penitentiary and pay a fine in the sum of $1000.” The petitioner was immediately thereafter, in compliance with said writ, returned to the state penitentiary to serve the remainder of his sentence under the commitment theretofore issued by the state court. He was released from the state penitentiary on the 21st day of May, 1931, after having served said sentence. He was then taken into custody by the United States marshal under the commitment from this court dated September 19, 1929, “enroute to the Federal penitentiary at McNeil Island.” On May 28, 1931, while still in the custody of the marshal en route to the penitentiary, application was made for a writ of habeas corpus.

The petitioner contends that the sentence of the United States District Court of September 19, 1929, ran concurrently with the sentence of the state court to the penitentiary at San Quentin; that, after deducting “good behavior allowance,” the two-year sentence of the federal court was completely served on May 23, 1931, and hence the petitioner was and is entitled to his liberty, and is being illegally restrained since that date.

Petitioner cites U. S. v. Daugherty, 269 U. S. 360, 46 S. Ct. 156, 70 L. Ed. 309; Boyd v. Archer, 42 F.(2d) 43, 70 A. L. R. 1507 (9 C. C. A.); Ponzi v. Fessenden, 258 U. S. 254, 42 S. Ct. 309, 310, 66 L. Ed. 607, 22 A. L. R. 879; and Ex parte Lamar (C. C. A.) 274 F. 160.

The Daugherty Case is authority for the rule that sentences (page 362 of 269 U. S., 46 S. Ct. 156) “run concurrently, in the absence of specific and definite provision therein that they be made to run consecutively by specifying the order of sequence”; and (page 363 of 269 U. S., 46 S. Ct. 156) “sentences in criminal cases should reveal with fair certainty the intent of the court and exclude any serious misapprehensions by those who must execute them. The elimination of every possible doubt cannot be demanded.”

Boyd v. Archer, supra, cites the rule above quoted in determining whether sentences on two different convictions are to run consecutively or concurrently, holding that the question is of the intent of the court.

Paraphrasing the holding quoted from the Daugherty Case, supra, surely the sentence of this court revealed with fair certainty that petitioner should serve the sentence in a federal penitentiary, and not in a state penitentiary. Had this court intended that the sentence imposed should run concurrently with that of the state court, it would have said so and suspended same. Furthermore, the United States marshal, whose duty it was to execute the federal commitment, immediately upon the expiration of the state sentence took the petitioner into custody under the commitment from this court and held him “enroute to the Federal penitentiary at McNeil Island,” showing there was no misapprehension on his part as to his duty in the premises. Imposition by this court of the sentence to run concurrently would have raised serious misapprehensions in the minds of those whose duty it was to execute the sentence, and might also have interfered with any possible pardon or parole on the state conviction.

In the case of Ponzi v. Fessenden, supra, Ponzi, while serving sentence under a federal commitment, was taken before a state court on a writ of habeas corpus, with the consent of the Attorney General of the United States, and tried and convicted of a. state law violation. Upon petition for a writ of habeas corpus, it was contended that the United States had exclusive jurisdiction and custody of Ponzi, and hence the state court had no jurisdiction to thus try him while in federal custody. Chief Justice Taft discussed at great length the respective jurisdictions and the two sovereignties, and used the following language:

“One accused of crime has a right to a full and fair trial according to the law of the government whose sovereignty he is alleged to have offended, but he has no more than that. He should not be permitted to use the machinery of one sovereignty to obstruct his trial in the courts of the other, unless the necessary operation of such'machinery prevents his having a fair trial, He may not complain if one sovereignty waives its strict right to exclusive custody of him for vindiea;tion of its laws in order that the other.may also subject him to conviction of . crime against it. In re Andrews (D. C.) 236. F. 300; United States v. Marrin (D. C.). 227 F. 314. Such a waiver is a matter - that addresses itself solely to the discretion of the-sovereignty making it and of its'representatives with power to grant it. * * *• '
“The chief rule which preserves our two-systems of courts from actual conflict of jurisdiction is that the court which first takes the subject-matter of the litigation into its control, whether this be person or property, must be permitted to exhaust its remedy, to attain which it assumed control, before the other court shall attempt to take it for its purpose. * * *
“In the ease at bar, the federal District Court first took custody of Ponzi. He pleaded guilty, was sentenced to imprisonment and. was detained under United States authority to suffer the punishment imposed. Until the-end of his term and his discharge, no- state court could assume control of his body without the consent of the United States.”

Here an analogous situation is presented. The petitioner was in the absolute eus-tody and control of the state under commitment from the state court, and the state was entitled “to exhaust its remedy, to attain which it assumed control, before the other court shall attempt to take it for its purpose.” Out of the spirit of comity the sovereign state of California waived its strict right to exclusive custody of petitioner for trial in this court for violation of federal ■laws. The federal court secured custody with permission of the sovereign state for the limited purpose of trial. Until the end of his term and his discharge under the state commitment, this court could not assume control of petitioner’s body without the consent of the state.

Ex parte Lamar, supra, holds that, if the sentence is vague and indefinite, the term will run concurrently. The sentence of petitioner by this court was “to be imprisoned for the period of two years in a United States Penitentiary,” etc. Petitioner contends this sentence is satisfied by serving a similar period in the state penitentiary. In Ex parte Lamar the court says at page 176 of 274 F.: “Servitude in the United States penitentiary at Atlanta did not answer the requirement to serve one year in Mercer county jail in New Jersey. The petitioner could not serve the term fixed for Mercer county jail until after be finished his term at Atlanta, Ga.”

Applying this language to petitioner’s case, it may be said that servitude in the state penitentiary did not answer the requirement to serve the sentence in a federal penitentiary imposed by this court.

None of the eases relied upon by the petitioner consider the question of sentences running concurrently when one sentence is imposed by the federal court and one by a state court, which is the situation in the instant case. Such a situation, however, was presented in Ex parte McCullen (D. C.) 29 F.(2d) 852, where a similar application was ■denied. In its opinion the court said at page 853: “As has repeatedly been held, the time when a sentence of imprisonment shall commence is properly no part of the sentence, and may be changed by the court at a subsequent term, if, for any reason, execution of the sentence has been delayed. Bernstein v. United States (C. C. A.) 254 F. 967, 3 A. L. R. 1569. This court had the power, when its attention was called to the fact that the petitioner was serving a sentence under a state court judgment for an entirely different of-, fense at the time it directed a remittitur to issue, to vacate any order theretofore entered in respeet to such issuance, and to direct that a remittitur issue to take effect on the expiration of the state judgment, as was done in this ease.”

In Bernstein v. United States, 254 F. 967, 3 A. L. R. 1569 (4 C. C. A.), Bernstein had been sentenced by a federal court to the penitentiary at Atlanta, Ga., for a period of eighteen months from date thereof. He was released on bail pending appeal, and conviction was affirmed several months thereafter. (C. C. A.) 238 F. 923. While released on bail, he was convicted in a District Court in another district, and sentenced to serve a term which did not expire until two years after the date when he was sentenced to Atlanta penitentiary for eighteen months. Upon being released under the second sentence, he was taken into custody by the marshal under the eighteen-month commitment, and sought release on a writ of habeas corpus, claiming that the eighteen-month sentence, having been directed to begin upon date thereof, had run concurrently with the sentence subsequently given in the second ease, and was entirely served. The court denied the petition for a writ of habeas corpus, and thereupon resentenced Bernstein to be imprisoned in a penitentiary at Atlanta for eighteen months, from which an appeal was taken. The Circuit Court, in affirming this order, used the following language (254 F. 967, 968, 3 A. L. R. 1569):

“But it has been repeatedly held that the naming of a date when the sentence shall be executed, or the period of imprisonment begin, is not a part of the sentence proper, and therefore such date may be changed after the term expires. In a legal sense, the sentence is the punishment fixed for the offense of which the accused has been convicted, and any order respecting the time of its infliction is but the award of execution or a direction to the clerk for framing the mittimus. Such an order or direction is said to be, not a judicial, but merely a ministerial, act, to which the rule invoked by appellant does not apply. « * *
“It follows from these decisions, with which we are in accord, that the court below had full power to make the order of April 8, 1918, which requires appellant to serve the sentence imposed upon him 2 years before. Although the order so recites, we think it inaccurate to say that he was 'resentenced,’ sinee the court made no change in the original sentence, but merely changed the previous direction as to the time when imprisonment should begin. When the order is so eon-sidered, as properly it should be, the other contentions of appellant are made to disappear.” Certiorari denied 249 U. S. 604, 39 S. Ct. 260, 63 L. Ed. 798.

The petition will be denied and an order made by this court directing that the sentence of imprisonment entered on September 19, 1929, shall begin to run upon the date .of the expiration of the sentence under the state commitment.


author: ERVIN, District Judge.

text:
    UNITED STATES v. NOEL.
    District Court, S. D. Alabama.
    May 23, 1931.
    Alex C. Birch, U. S. Dist. Atty., and D. R. Coley, Jr., Asst, to Dist. Atty., both of Mobile, Ala.
    Robert T. Ervin, Jr., of Mobile, Ala., for defendant.
   ERVIN, District Judge.

The defendant was indicted for selling less than one gallon of liquor, and the indictment charged that he had been found guilty in this court for a previous violation of the Volstead Act on March 3, 1925. The indictment was returned March 12, 1931, charging sale November 8, 1930. The defendant pleaded guilty, and the question arises as to the punishment to be imposed.

This requires an examination of the provisions of the Volstead Act, as amended by the Jones Act and as further amended by the Act of January 15, 1931 (27 USCA § 91).

Section 29 of title 2 of the Volstead Act (27 USCA § 46), in its first paragraph, imposes special penalties for the manufacture or sale of liquor.

The second paragraph imposes penalties for such violations of the act for which no special penalty is provided, which includes transportation, importation, exportation, and possession.

In each of these paragraphs provision is made for second and subsequent offenses, and the penalties for such are prescribed.

In the second paragraph it is said: “It shall be the duty of the prosecuting officer to ascertain whether the defendant has been previously convicted and to plead the prior conviction in the affidavit, information, or indictment.”

The Jones Act (27 USCA §§ 91, 92), was then passed which raises the penalties for manufacture, sale, transportation, importation, and exportation, and prescribes special penalties for transportation, importation, and exportation, where none had been previously prescribed.

The seeond section of the Jones Act says: “Section 91 shall not repeal nor eliminate any minimum penalty for the first or any subsequent offense provided by this title.” (Italics mine.)

The question arises, What effect does the Jones Act have on the provisions of the original statute, as to seeond and subsequent offenders as to manufacture, sale, transportation, importation, and exportation?

It will be noticed that the first section of the Jones Act says: “Whenever a penalty or penalties are prescribed in a criminal prosecution by this title, for the illegal manufacture, sale, transportation, importation, or ■exportation of intoxicating liquor * * * the penalty imposed for each such offense ■shall be a fine not to exceed $10,000 or imprisonment not to exceed five years, or both.” (Italics mine.)

Certainly there is in the title a penalty prescribed for second and subsequent offenders, for the manufacture, sale, transportation, importation, and exportation of liquors, and certainly, also, if we give the word “whenever” its ordinary meaning, it ■covers the penalties for seeond and subsequent offenders as well as those prescribed for first offenders.

Did. the Congress intend the Jones Act to have this effect?

Certainly in passing such act they considered the provisions of the Volstead Act as to. the punishment of seeond and subsequent offenders, for it expressly provides that the minimum, penalties so provided for by said act should not be repealed or eliminated.

. , Does not this show that they did intend to repeal and eliminate the maximum penalties so provided for .first, seeond, and subsequent offenders, and substitute for them the penalties therein imposed ?

Again, if we are to leave the provisions of section 29 of title 2 of the Volstead Act (27 USCA § 46) intact as to the punishment of seeond and subsequent offenders, then we have a very novel and unusual result where a first offender who makes or sells liquor may be fined $10,000, but, if he makes or sells it again, he can be fined only $2,000, for the same section makes it the duty of the prosecuting officers to plead the prior conviction, and the act says the offender may be fined not more than $2,000.

The provisions for punishing seeond and subsequent offenders for transportation would be much more grotesque.

Under the Jones Act, a violator may be fined $10,000 or imprisoned five years for the first offense, but under title 2, section 29. for a subsequent offense, he could be fined not less than $100 or imprisoned not more than two years. It cannot be presumed that Congress intended any such absurd result.

I, therefore, conclude that the meaning was to give the word “whenever,” as used in the Jones Act, its ordinary meaning, and raise the imprisonment in all eases to that fixed in the J ones Act, but to leave the minimum fine as provided in the Volstead Act, in the event a fine is imposed thereby.

This would leave the Volstead Act unchanged as to possession cases. Husty v. U. S., 282 U. S. 694, 51 S. Ct. 240, 75 L. Ed. 629.

The Act of January 15, 1931 (27 USCA § 91), amends the proviso of the Jones Act, but it also makes some new provisions. It says: “Any person who violates the provisions of this title, in any of the following ways: (1) by a sale of not more than one gallon of liquor * * * Provided, however, That the defendant has not theretofore within two years been convicted of a violation of this title * * * shall for each offense be subject to a fine of not to exceed $500 or to be confined in jail, without hard labor, not to exceed six months, or both.” The same provision is made as to transporta^ tion of not exceeding one gallon.

Here is an entirely new classification of offenses under the prohibition law, and under the provisos named applies to both first and subsequent offenses therein provided for.

The provision that the previous conviction must have been within two years eliminates convictions beyond that time, so, if the seller be not an habitual offender, a prior conviction of, say, three years before would not require or permit a punishment except as provided in the amendment of January 15, 1931. Of eourse, if the defendant had been convicted within two years of the commission of the subsequent offense or was an habitual violator, then the Act of January 15, 1931, would not apply, and the punishment would be measured by the original aet as amended.

I assume that, as the district attorney is required to allege a previous conviction, he should also allege the fact of habitual violation; certainly he should allege the fact that the sale or transportation was of not exceeding one gallon of liquor.

This amendment then creates two more new offenses viz. manufacture of not exceeding a gallon of liquor by one person alone, and assisting in making or transporting not exceeding one gallon of liquor by a casual employee.

The legal machinery for- the prosecution and punishment of violators of the National Prohibition Aet is getting quite complicated, and the prosecuting officers and judges will have many problems to solve. I frankly confess that until this case was presented to me I have been going along and applying the provisions of the Volstead Aet as to subsequent offenders, and was much confused in my first attempts to get a correct or clear idea as to what extent that aet had been changed or modified by the amendments.

In the instant case I have concluded that the defendant must be punished under the Aet of January 15, 1931, and I must ignore the allegation in the indictment of the’ conviction of March 3, 1925, as it was more than two years before the commission of the offense charged in this indictment.


author: HUTCHESON, Circuit Judge.

text:
    UNITED STATES ex rel. DOBRA v. LINDSEY, Immigration Inspector.
    No. 1449.
    District Court, S. D. Texas, at Houston.
    July 9, 1931.
    Harold M. Oster, of Galveston, Tex., for relator.
    H. M. Holden, U. S. Atty., and M. S. McCorquodale, Asst. U. S. Atty., both of Houston, Tex., for respondent.
   HUTCHESON, Circuit Judge.

■ Relator, under a warrant of deportation which finds that “he has been, found managing a house of prostitution or music or dance hall or other plaee of amusement or resort habitually frequented by prostitutes, or where prostitutes gather,” filed his application for a writ of habeas corpus, asserting that there was no ground for the finding and that therefore he was being unlawfully detained.

The proof establishes that the alien has lived in the United States and in Galveston, Tex, for more' than fifteen years, during which time he has never been arrested nor charged with an offense; that he is by occupation a longshoreman and that he has also from time to time been engaged, by himself and with "others, in running, small businesses, such as a restaurant and cigar and soft drink stand at 2701 Post Office street, the plaee where the charge is laid. That 'this number is in the section of Galveston occupied largely, if not mainly, by places of prostitution, but also in part by business houses which carrying legitimate goods, supply the trade to dwellers in and frequenters of the district and others.

There is some conflict in the evidence as to whether relator sold intoxicating liquor and ran a- gambling house at the plaee. There is sufficient evidence, however, to sustain the conclusion of the department that for at least a part of the time in question relator did conduct there, in addition to the restaurant, a soft drink, cigar, and cigarette business and a plaee for gambling, and did in the.soft drink stand conduct an illicit trade in liquors.

It is respondent’s claim that this primary finding, that relator did in such a district run a gambling house and sell illicit liquors, coupled with the testimony of the three negro women who admitted themselves to be prostitutes and with criminal records, and the testimony of the alien himself that plenty of women of the neighborhood came in to buy cigarettes, support the ultimate conclusion on which the warrant rests, that the relator “has been found managing a plaee of amusement or resort habitually frequented by prostitutes, or where prostitutes gather.”

Respondent declares that the plaee over which relator presided was the gathering ground for the three soeial disgraces, gambling, illicit liquor, and lewd women, and that not only within the spirit but within the letter of the law, his plaee was that character of resort and plaee of amusement to which the statute refers.

No case has been cited which has either construed or applied this section of the statute to facts like those at bar. It is, however, perfectly plain that the mere fact that prostitutes frequent a plaee of business for the purpose of carrying on there trade in legitimate articles of commerce does not condemn the place, nor bring under the law those who conduct it, for both in fact and in law “ladies must live” and the words of the statute have been ehosemwith care to make this clear.

That which is denounced is “a house of prostitution, or music or dance hall or other plaee of amusement or resort habitually frequented by prostitutes, or where prostitutes gather,” and it is clear that to bring a place under the law’s condemnation there must be conducted there a business itself subrosa like-the business "of prostitutibn upon which it feeds and thrives. The incidental or casual coming of prostitutes therefore, even to a gambling or illicit drink plaee, is not within the mischief of the statute (8 USCA § 155); it is the characteristic, the habitual, the recurring use of such plaee by prostitutes as a plaee of gathering or resort, “a place of frequent assembly, a haunt.” In re Sic, 73 Cal. 142, 14 P. 405, 410; Webster’s International Dictionary.

If then the evidence establishes that the place was maintained as a place where prostitutes met men for the purpose of gambling and drinking liquor with them, and that" it was maintained there to provide an opportunity for such a concourse, the fact that the proprietor of the place had no direct connection with or interest in the professional activities of his women customers would not save, him from the prohibition of the statute. On the other hand, if the evidence establishes no more than that the relator maintained a gambling plaee for men and in connection with his soft drink and cigar and cigarette stand did sell illicit liquors to persons who might come in to buy, the mere fact that some prostitutes incidentally came there and incidentally along with patronizing the restaurant, buying cigarettes and soft drinks there, did at times buy illicit liquor, and further that incidentally from time to time some woman of that class would come into the gambling house “to get her man out,” this would not make a ease under the statute; for this would not'show that the plaee in question was run and maintained as a hangout or haunt for the purpose of gathering and harboring prostitutes and catering to and thriving upon their business.

Considering the evidence in the case in the light of this controlling principle, I think it plain that no case has been made out; for while there is evidence on the part of one of the women, Fannie Hart, that she went in there on Saturday nights to get drinks, on the part of another, Winnie Stayton, that she had bought liquor in there and had been in there pretty often at night to get “my old man who was in there gambling,” and had seen a great many women of her ¿lass in there, and of Rosa Harris, that she had been in there two or three times, giving the fullest effect to this testimony, and disregarding the wholly unreliable character of the witnesses, it amounts to no more than that in a place consisting of a restaurant, soft drink stand, and gambling house some of the women of the district from time to time entered and from time to time were served in the soft drink part of the establishment with illicit' drinks. None of it supports the finding that they congregated in or resorted to the gambling house at all, or that the drinking place was in any manner a haunt for them.

But this is not all; looking to the whole testimony, that of Hamilton, the prohibition agent, that he had never found enough liquor in the place to justify prosecution; that he had never seen a woman in the place in his life, though he had been there several times; of Daniels, the police officer, that he had seen women go into the restaurant but that he had not seen any women in the bootlegging joint; that there was a pretty large stock of cigars and cigarettes there, and that the women of the district were very seldom seen there, they sent their maids to buy; the testimony of the alien that,.plenty of women came in to buy cigarettes; the entire absence of testimony that the place was used or resorted to by women for soliciting or plying their trade—the only conclusion which the evidence permits is that the place was not a haunt or hangout for prostitutes, but that their coming there was an incident, rather than a characteristic, of the business managed by the alien, and that within the meaning of the statute a ease of deportation against the 'alien is not made out.

It appearing that the detention of the relator is unlawful, it is ordered that he stand discharged.


text:
    WALLACE v. SEAGRAVES.
    No. 995.
    District Court, S. D. Texas, Houston Division.
    July 10, 1931.
    Templeton, Brooks, Napier & Brown, of San Antonio, Tex., and Williams, Neethe & Williams, of Galveston, Tex., for plaintiff.
    Vinson, Elkins, Sweeton & Weems, of Houston, Tex., for defendant.
   HUTCHESON, Circuit Judge.

This ease went to trial on a petition seeking judgment for the purchase price of stock, and for a recovery on account ‘ of certain bonds described in it. At the conclusion of the ease plaintiff in a motion filed August 8, 1929, prayed for (1) the purchase price of the stock; (2) for recoveries on account of the bonds, aggregating $119,900 plus interest. Judgment was entered for the amount due on the stock; recovery on account of the bonds was denied.

' Plaintiff thereupon filed his assignments of error as to the adverse judgment on the bonds. In the assignments of error and. in the brief pressing the appeal, he undertook to obtain in the Circuit Court of Appeals a reversal and rendition.

The brief of the plaintiff on cross-appeal asserted that the plaintiff was entitled to judgment for $217,000, and interest, and concluded: “Inasmuch as the contract and the undisputed evidence elearly shows the sums due, we respectfully submit that the judgment of the trial court, insofar as it denied recovery on the obligation of the bonds should be reversed and here rendered for plaintiff.”

The Circuit Court of Appeals concurred in the view of the cross-appellant that the court below had erred in not recognizing some liability on the part of defendant on account of the bonds, saying: “We conclude that it was error to deny any recovery against the defendant for the breach of his promise with reference to the outstanding bonds of the gas company. The judgment is affirmed in so far as it was in favor of the plaintiff, and reversed in so far as it was in favor of defendant and the cause is remanded for further proceedings not inconsistent with this opinion.” It oven-uled the request of cross-appellant that judgment be rendered in his favor and instead of either rendering or directing the trial court to enter the judgment for which, he prayed there, reversed and. remanded the cause for trial anew.

Now plaintiff comes with a motion asking this court.to enter in his favor without a retrial the judgment which he asked the Circuit Court of Appeals to render, thus in effect seeking to obtain'here what the order of the Circuit Court of Appeals has already denied him, with this difference, that whereas there he asked for $217,001) plus interest, here he asks first for $356,000, then for $447,000.

Plaintiff supports his motion with the citation of many authorities as to the power of the Circuit Court of Appeals and of this eourt in a ease of this kind. These authorities I think malee it clear that the relief which he asks -for may not be given. They are all to the effect that where a ease is tried to the eourt without a jury and has gone to judgment after full consideration on their merits of the issues which are legitimately in it, the Circuit Court of Appeals may either itself enter judgment, as in Bank of Waterproof v. Fidelity & Deposit Co., 299 F. 478; U. S. v. Illinois Surety Co., 226 F. 653, or send the ease back to the District Court with directions to enter such judgment, as in U. S. v. Stark (C. C. A.) 32 F.(2d) 453; Routzahn v. Mason (C. C. A.) 13 F.(2d) 702. Here neither of these things was done, but on the contrary by refusing to render and by reversing and remanding the cause the Court of Appeals has in fact and in law directed that the ease be tried anew on the cause of action as to the bonds.

If, however, I am incorrect in this and the order of that eourt may be construed as directing neither a retrial nor an entry of judgment, but reversing the ease leaving to this eourt the decision of what action may be right and proper under the circumstances, I think it perfectly plain that for this eourt now to undertake to enter judgment for plaintiff upon its large and constantly growing claims, not upon a hearing of the cause, but upon a basis of the account filed with this motion, would be to substitute trial by accountant for the ordinary trial in a eourt of law, and to deprive defendant of that which is guaranteed to him, his day in’ court, upon whatever issues of law and fact remain undecided. If plaintiff is correct in his position that the Circuit Court of Appeals has decided in his-favor every matter both of law. and of fact which might be asserted by the defendant in the course of a retrial, he cannot he in any wise injured or prejudiced by such trial, but will, at the end of it, obtain that which that court has given him warrant to obtain.

If, on the other hand, as I think the opinion in the light of the record makes perfectly clear, that eourt merely decided that the judgment of the trial court in denying to plaintiff any relief upon the bonds is wrong in principle and sent the case back to have the issues affecting that claim fully and completely tried out, plaintiff will obtain his judgment for all or for that part of his claim which he can, upon a trial, make stand up.

By a retrial no single right that he has can be lost to plaintiff. No single advantage that he has not can be gained by defendant. Upon a retrial the merits of the cause of action on the bonds, which on the former trial was from the beginning and throughout in principle by the trial court absolutely rejected, may be developed both in action and in defense, according to the potency.which it has derived from the Circuit Court of Appeals’ opinion. 'Whether that action is a single one maintainable by plaintiff for himself and others for the entire loss due to the diminution in value of the bonds as the result of the breach; whether it furnishes the basis for a series of actions upon the interest coupons due and to become due; whether plaintiff may require the defendant to pay over to it the installments of the sinking fund in their actual amount, or in their amount as discounted ; whether defendant may plead limitation; whether there is a defect of parties as to some or all of the bonds—in short, just what rights plaintiff has been given by the opinion of the Circuit Court of Appeals, and what defenses to the action defendant may still have, are all matters to be worked out in the course of an ordinary trial of the cause.

To the end, then, that that which I think it perfectly plain the Circuit Court of Appeals intended should be done may be done, the motion for judgment on the mandate is denied, and the cause is ordered placed upon the trial calendar for disposition in the due and ordinary course of proceedings.


author: WHALEY, Judge. GREEN, Judge (concurring).

text:
    MYERS v. UNITED STATES.
    No. K-308.
    Court of Claims.
    June 1, 1931.
    This ease having been heard by the Court of Claims, the court, upon the stipulation entered into between the parties, makes the following special findings of fact:
    1. The plaintiff at all times hereinafter mentioned was one of the executors, and is now the sole surviving executor, of the estate of Nathaniel Myers, deceased.
    2. On or about March 12,1923, the plaintiff made to the Commissioner of Internal Revenue his income tax return as executor of the estate of Nathaniel Myers, deceased, for the taxable year ending December 31, 1922, on official form 1040.
    3. On the basis of the said return for 1922, there were assessed against the plaintiff income taxes of $19,345.17, which assessment was subsequently reduced by $9,968.96, making a net assessment of $9,376.21.
    4. The said assessment of $19,345.17 was paid by the plaintiff as follows:
    “First installment, May 21, 1923, $4,836.-30, paid to the collector of internal revenue for the second district of New York;
    “Second installment, June 8, 1923, $4,-836.29, paid to the collector of internal revenue for the third district of New York;
    “Third installment, September 12, 1923, $4,836.29, paid to the collector of internal revenue for the third district of New York;
    “Fourth installment, December 14, 1923, $4,836.29, paid to the collector of internal revenue for the third district of New York; and the collector or collectors of internal revenue to whom said payments were made by the plaintiff turned over and deposited into the Treasury of the United States of America as in the course of his or their official business said payments.”
    5. On May 6, 1926, the plaintiff filed a claim for refund of the $9,968.96 referred to in finding 3 above, and said claim for refund was subsequently allowed and refund payments thereof were made as follows: First refund on or about April 22, 1928, $8,203.-88; second refund on or about December 1, 1928, $1,765.08.
    6. On September 9, 1927, plaintiff filed with the collector of internal revenue for the Third district of New York an additional claim for refund of income taxes paid for 1922 of $10,327.23.
    7. On October 29, 1928, plaintiff’s claim for refund referred to in finding 6 above was rejected in full by the Commissioner of Internal Revenue.
    8. In determining the net assessment of $9,376.21, referred to in finding 3 above, the Commissioner of Internal Revenue computed the taxable profit or deductible loss from the sale in 1922 by the plaintiff (as executor) of certain securities held by the decedent, Nathaniel Myers, at the time of his death and included in his estate, on the basis of the value of said securities at the date of decedent’s death.
    9. Haá the taxable profit or deductible loss from the sale of said securities been computed upon the cost basis of the said securities to the decedent, namely, their actual cost to the decedent or their March 1,1913, value, whichever was higher, the income of the plaintiff would have been $40,751.66 less than the amount which the Commissioner of Internal Revenue determined as the income of the plaintiff for 1922, and the tax assessable against the plaintiff would have been reduced by $9,149.25.
    10. The cost basis of the securities referred to in findings 8 and 9 above, to the decedent, and their value at the date of his deaths were as follows:

    11. If the plaintiff is correct in his claim that the proper basis to be used in computing the taxable profit or deductible loss from the sale of securities listed in finding 10 above is the cost basis of the said securities to the decedent, the plaintiff will be entitled to $9,-149.25, with interest, after allowing all just claims and set-offs.
    McLaughlin, Knollenberg & Leisure, of New York City (Bernhard Knollenberg, of New York City, on the brief), for plaintiff.
    Charles B. Rugg, Asst. Atty. Gen. (Charles R. Pollard and William T. Sabine, Jr., both of Washington, D. C., on the brief), for defendant.
    Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
   WHALEY, Judge.

The facts as found in this ease are not disputed. In the ease of Elmhirst, Executrix, v. United States, 38 F.(2d) 915, 69 Ct. Cl. 295, the court in construing section 202 (a) of the Revenue Act of 1918, 40 Stat. 1057, 1060, held the gain or loss arising from the sale of securities by an executor is, for income tax purposes, to be computed on tbe basis of their cost to decedent and not on the basis of their value at the date of decedent’s death. The question in this ease is whether the value of decedent’s securities at time of death is their cost within the meaning of section 202 (a) and (b), Revenue Act of 1921, 42 Stat. 2-27, 229. The two sections, as to the point in issue, in substance, are the same and the decision in the Elmhirst Case, supra, is controlling.

Judgment is for the plaintiff. It is so ordered.

BOOTH, Chief Justice, and WILLIAMS, Judge, concur.

GREEN, Judge

(concurring).

I concur solely on the ground that this court has twice decided the legal question in controversy in this ease (McKinney v. United States, 62 Ct. Cl. 180 and Elmhirst v. United States, 38 F.(2d) 915, 69 Ct. Cl. 295), and in both instances certiorari has been denied by the Supreme Court. 273 U. S. 716, 47 S. Ct. 108, 71 L. Ed. 855; 282 U. S. 855, 51 S. Ct. 29, 75 L. Ed.-.

LITTLETON, Judge.

It seems to me that a decision in favor of the plaintiff in this case is inconsistent with the intent and purpose of the statutes taxing estates and with the decision in Merchants’ Loan & Trust Co. v. Smietanka, 255 U. S. 509, 41 S. Ct. 386, 65 L. Ed. 751, 15 A. L. R. 1305, and with the position taken by this court in Nichols et al. v. United States, 64 Ct. Cl. 241. In the last-mentioned case this court stated that “when * * * * an item is properly determined to constitute a part of the gross estate of a decedent for estate-tax purposes it can not by any sort of reasoning be made to constitute a part of the income of the same estate. It is a part of the corpus.” And further it is stated that “the income * * * which the statute taxes is, generally speaking, the income which accrues after the estate begins, and it begins with the decedent’s death.”

In view of the provisions of the statutes, section 219 of the Revenue Act of 1918, 40 Stat. 1071, and the same section of the Revenue Acts of 1921 (42 Stat. 246) 1924 (43 Stat. 275 [26 USCA § 960 note]) and 1926 (44 Stat. 33), making an estate a separate taxable entity, I do not think the estate can be said to stand in the shoes of the decedent for the purpose of the determination of gain or loss upon the sale of property by the estate during the period of administration. Such holding would necessitate the determination of depreciation and depletion allowable to an estate or trust in a proper case upon the basis of cost to the decedent or the March 1, 1913, value in his hands. If the basis in the hands of the decedent is to be used in determining gain or loss to the estate upon the sale of property by it, I fail to see how it can consistently be held that the collection by the estate of amounts due the decedent at his death constitutes capital and not income. If the estate stands in the shoes of the decedent, it would be collecting income due the decedent and would be taxable upon it. As a separate and distinct taxable entity, however, the decision in Nichols et al. v. United States, supra, was right, and, applying that theory, the basis for determination of gain or loss to the estate upon the sale of property passing to it from the decedent is the market value at the date of the decedent’s death. The basis for computing gain or loss resulting from the sale of property of an estate by an executor is the same as the basis in the ease of sale of property acquired by gift, devise, or bequest, namely, the value at the date of acquisition, if subsequent to March 1, 1913, and, since an estate is a taxable person, the gain to the estate must be computed on that basis and the tax paid thereon. Irrespective of its characterization in other fields of law, an estate is regarded for federal income tax purposes as a distinct and complete tax entity. Nichols et al. v. United States, supra; Baltzell v. Mitchell (C. C. A.) 3 F.(2d) 428; Bankers’ Trust Co. v. Bowers (C. C. A.) 295 F. 89, 31 A. L. R. 922; Catherwood v. United States (C. C. A.) 291 F. 560; McCarthy, Executor, 9 B. T. A. 525. For such purposes this entity is unrelated to and independent of its grantor or creator. For tax purposes it is likewise completely segregated from its beneficiaries, even if the beneficiary and fiduciary are identical. Studebaker, 2 B. T. A. 1020. The estate must necessarily act through a representative, the fiduciary. All taxes of the entity are therefore directed against the fiduciary, not personally but in his capacity as a representative of the estate entity.

After the decision of this court in McKinney et al. v. United States, 62 Ct. Cl. 180, the Treasury Department on April 6,1927, C. B. VI-1, page 248, changed article 343 of regulations 45, 1920 edition, but on July 7, 1928, C. B. VII-2, page 134, after the decision of this court in Nichols et al. v. United States, supra, and the decision in Bankers’ Trust Co. v. Bowers (D. C.) 23 F.(2d) 941, and Dorothy Payne Whitney Straight, Executrix, 7 B. T. A. 177, revoked the amendment of April 6, 1927, and restored the original article 343 of the regulations providing that the basis for the determination of gain or loss on the sale of property by an estate should be the value of such property at the date of decedents’ death. With this exception the regulations and rulings of the Treasury Department from the beginning of the taxation of estates have always prescribed that the value of the property at the date of death of the decedent should be the basis for the determination of gain or loss to the estate. A few of the early decisions are cited below. Since estates were first made taxable entities, the law has been changed only in its minor details. The position taken in the regulations as they stood for many years, and as they now stand, is supported by Merchants’ Loan & Trust Co. v. Smietanka, 255 U. S. 509, 41 S. Ct. 386, 387, 65 L. Ed. 751, 15 A. L. R. 1305; Brewster v. Gage, 280 U. S. 327, 335, 50 S. Ct. 115, 74 L. Ed. 457; Bankers’ Trust Co. v. Bowers (C. C. A.) 295 F. 89, 31 A. L. R. 922; Bankers’ Trust Co. et al. v. Bowers (D. C.) 23 F.(2d) 941; Dorothy Payne Whitney Straight, supra; Klein’s Federal Income Taxation, c. XXXIV, pp. 1133-1165; Holmes’ Federal Income and Profits Taxes (1920 Ed.) c. 2, pp. 69, 75, and Holmes’ Federal Taxes (6th Ed.) e. 4, pp. 54 and 76, § 53, and chapter 17, p. 588; and Foulke’s Federal Income Tax, c. 43, § 1446, p. 681.

In Merchants’ Loan & Trust Co. v. Smie-tanka, supra, the trustee received the property from the decedent in 1912 and sold certain portions of it in 1917. The Commissioner taxed the trustee on the difference between the March 1,1913, value, since that value was higher than the value at the date the trustee received the property, and the sales price. The court said: “Plainly the gain we are considering was derived from the sale of personal property, and, very certainly the comprehensive last clause ‘gains or profits and income derived from any source whatever,’ must also inelude it, if the trustee was a ‘taxable person’ within the meaning of the act when the assessment was made.”

The court then proceeded to point out that a trustee was a “taxable person,” and that it was the purpose of Congress to tax gains derived from such a sale as was there involved in the manner in which the tax was assessed, and stated: “Thus, it is the plainly expressed purpose of the act of Congress to treat-such a trustee as we have here as a ‘taxable person’ and for the purposes of the act to deal with the income received for others precisely as if the beneficiaries had received it in person.”

The force of this decision is not lessened because the basis used was the March 1,1913, value, because the decedent died and the property was received by the trustee also pri- or thereto. The important feature of the decision is that the trustee was held to be taxable upon the gain derived precisely as if the gain had been derived by a beneficiary, which, in the ease of a decedent dying before March 1, 1913, would be the value at the date of death or the March 1, 1913, value, whichever was the higher, and, in the ease of a decedent dying after March 1, 1913, would be the fair market value at the date of death. Brewster v. Gage, supra. The sections of the statute which impose the tax upon a trustee also impose the same tax liability upon estates. The gist of the decision in McKinney et al. v. United States, supra, is contained in the following statement of the court: “OP course, there was no cost to the executors. They were the personal representatives of the decedent. The stock was the same stock as it had been in the hands of the decedent, and, as stated, had he lived and sold the stock himself there would have been no question of taxable gain. The fact that they were executors did not alter the situation.”

This seems to overlook the faet that the estate is made a distinct taxable entity and the tax is not imposed upon the executors in their representative capacity. The court further quoted from the government’s brief in Merchants’ Jman & Trust Co. v. Smietanka, supra, in which the government contended under the facts in that ease that “the gains received by a trustee under a will by the profitable sale of capital assets purchased by the testator in his lifetime are measured in precisely the same way they would have been measured if the latter had lived and made the sale himself,” and stated, “and this view of the matter was accepted by the court as is evident from its decision.” This statement in the brief seems to -have been directed to the proposition that a trustee was a “taxable person.” In any event it would seem that the Supreme Court in the Smietanka Case did not hold that the basis to the trustee for the determination of gain or loss was the ■same as that to the decedent, since it specifically held that it was the purpose of Congress to deal with the income received by the trustee “precisely as if the beneficiaries had received it in person.”

There would seem to be no reason to supi-pose that in ease of a taxable estate it was intended that the basis for determining gain or loss should be the cost, or value, in the hands of another and a different taxpayer. It is said that the estate has no “cost” and therefore cost to the deceased owner must be used. But this is not always true. In the absence of actual cost, market value in an appropriate case is cost. Heiner v. Tindle, 276 U. S. 582, 48 S. Ct. 326, 327, 72 L. Ed. 714; Colgate & Co. v. United States, 66 Ct. Cl. 510; Brewster v. Gage, supra. Heiner v. Tindle, supra, involved the deductibility of a loss sustained upon the sale of property originally purchased and used for a long time as a residence and later used as property for the production of income and profit. The court, in holding that the fair market value of property at the date of the change from residence to business property (although the statute was silent in that regard) was the proper basis for determining gain or loss upon a subsequent sale, said: “The same and no greater inconsistency and difficulty arise in the case of property acquired by gift, bequest or devise, when market value at the time of acquisition by the donee and not cost is necessarily the basis of computing the tax.” It seems apparent that the purpose of the statute in making the estate a “taxable person” was that its gains and losses during the period of administration should be determined on precisely the same basis as in the ease of a trustee or beneficiary. The purpose of taxing income and gains derived during the period of administration was to prevent gains and profits from escaping taxation. In Brewster v. Gage, supra, the court, at page 334, of 280 U. S., 50 S. Ct. 115, 116, said: “Upon acceptance of the trust there vests in the administrators or executors, as of the date of the death, title to all personal property belonging to the estate; it is taken, not for themselves, but in the right of others for the proper administration of the estate and for distribution of the residue.”

It seems from the foregoing that the estate which is the taxable entity, and which must pay the tax, does not for the purpose of taxation represent or stand in the shoes of the decedent. Although the executors in some respects represent the decedent, the advent of provisions of the income tax law making the estate a separate, distinct, and complete taxpayer has operated somewhat to change this rule. An estate of a deceased person in process of administration is subject to a dual tax liability—first, liability for a tax owed by a decedent; and, secondly, liability for a tax owed by the estate as an entity. The death of the decedent terminates the taxable year. The executor or administrator is required to file a return for this taxable period and to pay for the decedent on his income during the period prior to his death. Death does not extinguish the decedent’s liability to the tax. His estate continues to be liable to pay such tax, and, in so doing, the estate acts for the decedent, functioning as his representative after death. Quite apart from its liability as representative of the decedent the estate is subject to an entirely different tax liability. It is liable as an entity to pay tax on all its net income, and its liability is almost identical with tax liabilities of trusts, and this liability remains as long as the period of administration continues. Where an estate is still in process of administration it is taxed only on income of property which it still retains in its possession and control. Where property is distributed pursuant to provisions of a will while the estate is still in process of administration income on such property earned after distribution is not taxable to the estate but solely to the distributees. In Klein’s Federal Income Taxation, par. 34:21 (a), page 1159, it is pointed out that “the effect of the decedent’s death is to capitalize all his property and rights of every nature and description. At the instant of death all assets of the decedent, even those which if reduced to possession would be income in his hands, are transmitted into capital and pass to his estate. These assets include all rights and ehoses in action which have accrued to the decedent. The decedent ceases as a tax entity for all purposes. In his estate there has been created a new tax entity, which is completely disassociated from the decedent and which pays tax on a net income of its own. For tax purposes the estate does not continue merely as a representative of the decedent, and solely as a vehicle for the projection of his personality after his existence has been terminated. It functions ostensibly for itself, but actually for the beneficiaries who 'will eventually receive the income and corpus of the estate. Bankers’ Trust Co. v. Bowers (D. C.) 23 F.(2d) 941. The estate embarks on its operations with a capitalization consisting of all the property of the decedent. The transfer of property to the estate at the time of death never results in income, even though enhancement in the value of the property has occurred since the time of its acquisition by the decedent. Everything received by the estate at the time of death is capital.”

The foregoing is consistent with the regulations of the Treasury Department which have been approved by the United States Board of Tax Appeals in many instances under the Revenue Acts of 1918, 1921, and 1924. Barnes et al., 8 B. T. A. 360; McCarthy, Executor, 9 B. T. A. 525; Markle et al., 10 B. T. A. 763; Anderson, 10 B. T. A. 1376; Heywood et al., 11 B. T. A. 29 ; Vanderbilt et al., 11 B. T. A. 291; Miller, 11 B. T. A. 854; Clark, 12 B. T. A. 425; O’Brien et al., 12 B. T. A. 1195; Blodget et al., 13 B. T. A. 1243; Richards, 15 B. T. A. 800; Wolfe, 15 B. T. A. 835; Central Trust Co., 19 B. T. A. 867; and Stearns, Executor, 22 B. T. A. 1319, decided April 28, 1931. The theory that an estate acts merely as the agent of the decedent in disposing of property and that consequently the result is the same as if the decedent himself had sold the property seems inconsistent with the provisions of the statute making the estate a separate and distinct taxable entity. The property sold by the estate is sold for the benefit of the living beneficiary, who will eventually be entitled to receive the proceeds of sale. The decedent no longer has any interest in the property, either actually or theoretically, and, in the absence of any statutory direction, it would seem that the basis should be the basis of those beneficiaries and not the basis of the decedent.

The case of Bingham et al. v. Long, 249 Mass. 79, 144 N. E. 77, 78, 33 A. L. R. 809, involved a complaint for the abatement of an income tax. The testator, of whose will the complainants were ■ executors, died in 1921. After their appointment and during 1921 the executor sold intangible property of the estate of the decedent at a considerable advance over its cost to the decedent, who acquired it subsequent to January 1, 1916, but at a price less than its fair market value on the date of death of the decedent or at the time of the qualification of the executor. A state income tax was claimed on the difference between the cost to the decedent and the amount realized from the sale by the executors. The court said: “The question for decision is whether, in ease of a sale by executors, during the settlement of the estate, of intangible property owned by the testator at his death, the basis for ascertaining whether there has been a gain or a loss for income-tax purposes is the value of such property at the time of the death of the testator or its value at the time of its acquisition by him.” The court held that the value at the date of death was the proper basis for ascertaining gain or loss to the estate, and, in the opinion of Chief Justice Rugg, said:

“Although the tax is exacted in these instances from the executor, administrator, or trustee, the person upon whom the burden of the tax fairly rests is the beneficiary, and whether the tax shall be levied at all depends upon the residence of the beneficiary. The right and interest of the beneficiaries in the property of the estate springs into existence at the death of the testator. Treadwell v. Cordis, 5 Gray, 341, 352, 353; Minot v. Amory, 2 Cush. 377; Hooper v. Bradford, 178 Mass. 95, 59 N. E. 678; Old Colony Trust Co. v. Treasurer and Receiver General, 238 Mass. 544, 548, 131 N. E. 321, 16 A. L. R. 689.
“The executor or administrator, while in some respects holding in the right of the deceased, has title in his own right. He is. the owner of the personal estate of the deceased although in a fiduciary capacity. * * *
“The decedent did not receive any income by the passage of his property on his death to his executor. The executor became on his appointment accountable for the actual value of the estate. Dudley v. Sanborn, 159 Mass. 185, 188, 34 N. E. 181; G. L. c. 206, § 5. * * * "

Under the decisions in Merchants’ Loan & Trust Co. v. Smietanka, supra, and Brewster v. Gage, supra, and the other authorities cited, it seems to me that the fair market value at the date of decedent’s death, if subsequent to March 1, 1913, is the proper basis for the determination of gain or loss upon a sale by an estate during the period of administration. The case of Brewster v. Gage, supra, involved the question as to the date of acquisition of property by a residuary legatee for the purpose of fixing the basis for the determination of gain or loss upon the sale thereof. In consideration of that question, the court said: “The Revenue Act of 1918 and subsequent acts taxed incomes of estates during the period of the administration, including profits on sales of property, and such gains are calculated on value at date of decedent’s death. [Citing section 219 of the revenue acts of 1918 (40 Stat. 1071), 1921 (42 Stat. 246), 1924 (43 Stat. 275 [26 USCA § 960 note]), and 1926 (44 Stat. 32), and art. 343 in Treasury Regulations 45, 62, 65, and 69.] There appears to be no reason why gains or losses to the estate should be calculated on one basis and those to the residuary legatees on another.” (Italics supplied.) The Treasury regulations cited by the court provide that the basis for determining gain or loss upon the sale of property by an estate is the value thereof at the date of decedent’s death. As was further said by the court in Brewster v. Gage, page 336 of 280 U. S., 50 S. Ct. 115, 117: “These regulations were prepared by the Department charged with the duty of enforcing the acts. The rule so established is reasonable and does no violence to the letter or spirit of the provisions construed. A reversal of that construction would be likely to produce inconvenience and result in inequality. It is the settled rule that the practical interpretation of an ambiguous or doubtful statute that has been acted upon by officials charged with its administration will not be disturbed except for weighty reasons. Logan v. Davis, 233 U. S. 613, 627, 34 S. Ct. 685, 58 L. Ed. 1121; Maryland Casualty Co. v. United States, 251 U. S. 342, 349, 40 S. Ct. 155, 64 L. Ed. 297; Swendig v. Washington Water Power Co., 265 U. S. 322, 331, 44 S. Ct. 496, 68 L. Ed. 1036.”

In Fawcus Machine Co. v. United State, 282 U. S. 375, 51 S. Ct. 144, 145, 75 L. Ed. 397, the court said: “The regulations were made pursuant to express authority (see see-tion 1309 of the Revenue Act of 1918). They are valid unless unreasonable or inconsistent with the statute. United States v. Grimaud, 220 U. S. 506, 517, 518, 31 S. Ct. 480, 55 L. Ed. 563; International Ry. Co. v. Davidson, 257 U. S. 506, 514, 42 S. Ct. 179, 66 L. Ed. 341. They constitute contemporaneous construction by those charged with the administration of the act, are for that reason •entitled to respectful consideration, and will not be overruled, except for weighty reasons. United States v. Moore, 95 U. S. 760, 763, 24 L. Ed. 588; Brewster v. Gage, 280 U. S. 327, 336, 50 S. Ct. 115, 74 L. Ed. 457.”

The same reasoning applies to the question here involved and to the regulations relating thereto. In all of the revenue law there are few better illustrations of legislative approval of departmental construction. The statement by the court in Brewster v. Gage, stated above, that gains on sales of property by estates during the period of ad■ministration are calculated on the value at the date of decedent’s death, although that precise question was not involved in the case being decided, seems to be of especial significance and importance here. In the Gage Case the court further stated that “the rule that ambiguities in tax laws are to be resolved in favor of taxpayers has no application here, because it is impossible to determine which basis would impose a greater burden.”

The Committee' on Ways and Means of the Sixty-Seventh Congress, First Session, in its report, No. 350, accompanying the Revenue Act of 1921, H. R. 8245, had before it and considered the decision of the Supreme Court in Merchants’ Loan & Trust Co. v. Smietanka, 255 U. S. 509, 41 S. Ct. 386, 65 L. Ed. 751, 15 A. L. R. 1305, which had been decided on March 28, 1921, and stated on page 9 thereof with reference to the “basis for determining gain or loss” provided in section 202 of the Revenue Act of 1921, as follows:

“In the ease of property acquired before March 1, 1913, under existing law, the basis for determining gain or loss is the fair market price or value of such property as of that date. The decision of the Supreme Court in the case of Merchants’ Loan & Trust Co. v. Smietanka (decided Mar. 28,1921), makes necessary not a fundamental modification of that rule, but a more detailed statement of its application.
“The proposed bill gives explicit effect to the doctrine approved in that decision. • * *
“The special rules embodied in existing law with respect to property which should be included in the inventory, and property acquired by bequest, devise, or inheritance are in substance preserved. An essential change, however, is made in the treatment of property acquired by gift. No explicit rule is found in the present statute for determining the gain derived or the loss sustained on the sale of property acquired by gift; but the Bureau of Internal Revenue holds that under existing law the proper basis is the fair market price or value of such property at the time of its acquisition. This rule has been the source of serious evasion and abuse. Taxpayers having property which has come to be worth far more than it cost give such property to wives or relatives by whom it may be sold without realizing a gain unless the selling price is in excess of the value of the property at the time of the gift. The proposed bill in paragraph (2) of subdivision (a) provides a new and just rule, namely, that in the ease of property acquired by gift after December 31, 1920-, the basis for computing gain or loss shall be the same as the property would have in the hands of the donor or the last preceding owner by whom it was not acquired by gift.”

See, also, report No. 275, Sixty-Seventh Congress, First Session, of the Committee on Finance of the Senate.

Inasmuch as the report on the Revenue Act of 1921 gave explicit approval to the decision in the Smietanka Case in which the Supreme Court held that a trustee receiving property under a will was taxable precisely the same as a beneficiary would be taxable had he received the property direct from the decedent,'and made a change in the law so as to provide that in ease of a gift the basis for determining gain or loss should be the same as the property would have in the hands of the donor or last preceding owner by whom it was not acquired by gift, it seems to have given approval to the regulations and practice of the Department which used as the basis for determining gain or loss upon a sale by trustees, executors, or administrators the-value at the date of death if subsequent to-March 1, 1913, or such value or the value on March 1, 1913, whichever was the higher, if' the decedent died prior to March 1,1913.

By permission of the court I state the-foregoing as my personal views, inasmuch as-this is the first case involving this question in which I have participated since becoming-a member of this court. However, in view of the previous decisions of this court, by which I am bound, I concur in the result reached, by the majority in this case.

       O. D. 6, 1 C. B. 37; L. O. 1012, 2 C. B. 34; O. D. 129, 1 C. B. 175; O. D. 219, 1 C. B. 180; O. D. 560, 2 C. B. 175; O. D. 667, 3 C. B. 52; O. D. 694, 3 C. B. 53; O. D. 731, 3 C. B. 210; I. T. 1379, C. B. I-2-387; I. T. 1638, C. B. II-1-847; I. T. 1719, C. B. II-2-981.