author: GALSTON, District Judge.

text:
    MERINOS VIESCA Y COMPANIA, Inc., v. PAN AMERICAN PETROLEUM & TRANSPORT CO. et al.
    No. 2839.
    District Court, E. D. New York.
    April 22, 1931.
    See also (D. C.) 40 F.(2d) 928.
    Pleasants & Lowry, of New York City (Samuel A. Pleasants, of New York City, of counsel), for plaintiff.
    Kellogg, Emery & Inness-Brown, of New York City (Dean Emery and J. Fearon Brown, both of New York City, of counsel), for defendants.
   GALSTON, District Judge.

On the pleadings the defendants have moved for judgment dismissing the complaint pursuant to rule 112 of the Rules of Civil Practice, and on the further ground that this court is forum non conveniens.

Señora Cruz, the owner of certain lands in Mexico, in' the State of Yera Cruz, on June 21, 1902, executed and delivered to one Adolfo Merinos a power of attorney concerning the leasing of the lands.

The complaint alleges that under the laws of Mexico this power of attorney is a general power and gave Merinos no authority to sell property, either real or personal, or to confer title to the rights to the subsoil or to the products thereon.

Subsequent to the making of this power of attorney, Merinos executed and delivered to the Pan American Company a lease covering these premises, for a period of thirty years beginning on July 1, 1906. By this instrument Merinos undertook to grant to the Pan American Company a license to mine, drill, explore, exploit, extract, and export the crude oil and analogous substances such as petroleum, gas, etc., which might be found on the surface or in the subsoil. It is then alleged that this license from Merinos to the Pan American Company, so far as it attempted to confer upon that defendant the privilege of exploiting and removing the subsoil and extracting the petroleum products, was by virtue of certain sections of the Codes of Mexico and Yera Cruz null and void.

It is alleged that the Pan American Company, at the time of the execution of the Merinos lease, had full knowledge of the limitations of the authority of Merinos under the power of attorney granted to him by Señora Cruz; that subsequently on July 20, 1907, this company assigned to the defendant Tamiahua Petroleum Company its rights under the lease, and that the Tamiahua Petroleum Company also had knowledge of the limited authority of Merinos under the alleged general power of attorney from Señora Cruz, and of the laws of the State of Yera Cruz and of the United States of Mexico in respect to powers and leases of lands.

It is then alleged that in violation of the rights of Señora Cruz, and without her written consent, the Tamiahua Petroleum Company drilled and mined the -subsoil and removed and exported oil therefrom to the extent of approximately one hundred and twenty-two million barrels.

Señora Cruz remained the owner of the property up to the time of her death on December 2, 1919; leaving a will under which her natural son, Gerónimo Merinos, was made her sole and “universal heir,” as well as the executor of her estate; thereafter there was a meeting of the heirs of Señora Cruz on September 6, 1920, pursuant to the laws of Mexico, relating to the distribution of real and personal property, and at that meeting Gerónimo Merinos was declared to be the sole and universal heir of Señora Cruz. Thus ownership in the aforesaid lands is alleged to have been in Gerónimo Merinos from December 2, 1919, to March 18, 1921, at which time he elected to terminate the aforesaid leas? and to recover damages sustained to the premises by reason of alleged wrongful exploitation of the subsoil and the sale of the products extracted therefrom.

It is alleged that the value of the products thus removed, between July 20, 1907, and March 18,1921, was $97;600,000.

On November 11,1922, Gerónimo Merinos assigned his claim against the defendants to a partnership known as Merinos Viesca y Compañía. On December 29; 1925, that firm assigned its claim against the defendants to the plaintiff herein.

The first four causes of the complaint would seem to seek to recover damages for an alleged anticipatory breach of .the lease; the fifth cause of action is for an alleged conversion but based upon contentions in respect to the infirmity of the Merinos power of attorney and the limitations of said lease to the Pan American Company.

The answer consists of a general denial and of fourteen separate defenses. The first four defenses relate to various statutes of limitation in New York, Vera Cruz, Delaware, and Maine.

The fifth defense incorporates a copy of the power of attorney executed June 21, 1902, by Señora Cruz in favor of her son, Adolfo Merinos, and also a copy of the lease from Señora Cruz (aeting by Adolfo Merinos, her attorney in fact) to the Pan Ajnerican Company; and also alleges that Señora Cruz and her heirs had full knowledge of the acts of the Tamiahua Petroleum Company concerning the extraction of petroleum from the leased premises and from oil wells drilled thereon, and knowledge also of the construction upon said premises, at great expense to the lessee, of roads, highways, tanks, pumping stations, machinery, communication lines, etc.; that the defendant at all times paid.the rent called for in the lease; that Señora Cruz and her successors accepted such rent with full knowledge that the defendant was extracting petroleum from the subsoil of the leased lands, and that no ' attempt was made during this period by the lessor, or any one purporting to succeed to her interests, to repudiate the lease because of any alleged unlawful acts of the lessee, until March 18, 1921, when Gerónimo Merinos elected to terminate the lease on the grounds heretofore stated. This defense is, therefore, one of ratification.

The sixth defense sets forth a ratification by Señora Cruz in the form of a public document executed August 21, 1917.

The seventh defense alleges also ratification, this by a document executed by Gerónimo Merinos on April 28,1924. .

The eighth defense alleges an estoppel arising out of the failure of Señora Cruz, or any of her successors, to protest full knowledge on the part of Adolfo Merinos, her attorney in' fact, of the alleged unlawful acts of the defendants or any of them.

The ninth defense is one of estoppel arising out of the failure by the plaintiff or its assignors to return the rent or make any offer of restitution.

The tenth defense has to do with res adjudicata arising out of the adoption in the Republic of Mexico of the Constitution of 1917, and the enactment in pursuance thereof by the Mexican Federal Congress of a law concerning petroleum. In accordance with this Constitution and the Petroleum Law, the defendant Tamiahua Petroleum Company filed with the Secretary of Industry of the Department of Commerce and Labor, its application for a confirmatory concession upon Lot 165 Chinampa. The aforesaid Department is alleged to have found the application and the confirmatory concession of the defendant to be in all respects good and valid, with full knowledge on the part of and notice to all persons claiming ownership or rights in said lot; and that neither the plaintiff nor any of its alleged predecessors in title made application for a confirmatory concession in respect to lot 165, nor did they oppose the application of the defendant Tamiahua Petroleum Company.

The eleventh defense alleges that the rights of the parties to this action are governed by foreign law and that by reason of the circumstances this court should decline to take jurisdiction of the action.

The twelfth defense is one of res adjudieata based on an action instituted in Mexico against the defendant Tamiahua Petroleum Company, for the recovery of the subsoil and for the restitution of the value of the petroleum and similar substances which may have been extracted by the defendant; that said action was based substantially upon the same allegations as those set forth in the complaint herein; that the action was determined in favor of the defendant upon appeal to the Supreme Court of the State of Tamaulipas, Mexico. Thereafter on May 3, 1924, by virtue of another proceeding brought, the revocation of the power of attorney to Yiesca and Ruiz by Gerónimo Merinos was confirmed, and by reason of the termination of said action in defendant’s favor, the said Yiesca and his associates determined to invoke the jurisdiction of the courts within the United States of America, and caused the plaintiff company to be organized under the laws of the state of New York solely for the purpose of instituting this action.

The thirteenth defense alleges a release by Gerónimo Merinos of each and every alleged cause of action set forth in the complaint.

The fourteenth defense alleges a sale by Gerónimo Merinos of the premises in question to a corporation known as Doheny, Bridge y Cia.

The plaintiff was by court order directed to reply to the fifth, sixth, eighth, ninth, tenth, eleventh, and twelfth of such special defenses, and in such reply makes denials and allegations which place such defenses substantially in issue.

Por the purposes of this motion, the allegations of the complaint must be taken as true, Poss v. Gottlieb, 118 Misc. Rep. 318, 193 N. Y. S. 418; so also must the allegations of the reply be deemed true, Webster v. Roe, 124 Misc. Rep. 110, 207 N. Y. S. 102.

Heretofore in this cause a motion was made before Judge Inch, before issue was joined, to dismiss the complaint on the ground that it failed to state facts sufficient to constitute a cause of action. The motion was denied, and so of course must this motion, unless now, as defendants claim, the reply admits sufficient to defeat plaintiff’s cause of action. The power of attorney and the lease, which underlie the entire controversy, are part of the answer.

Are there such admissions in the reply in respect to those instruments as would defeat the plaintiff? If not, the defendants cannot prevail. Lowe v. Plainfield Trust Co., 216 App. Div. 72, 215 N. Y. S. 50.

Now, primarily and essentially, to determine whether the lease in all respects is valid, the power of attorney to Adolfo Merinos must be construed. By what law is it to be eonstnied? It was a power given in Mexico and pursuant, ostensibly, to the requirements of Mexican law, and for acts to be exercised in Mexico. It cannot be doubted that the validity and scope of this power of attorney must be determined by Mexican law. So far as this court is concerned, that law is a matter of fact to be alleged and proved. The allegations of plaintiff’s pleadings leave no room to doubt that the pleader’s contention is that the power was insufficient to enable the attorney in fact to make an oil lease. Such being the situation as to the pleadings, it would be venturesome on the part of this court, without the aid of proof as to foreign law, to determine the matter of validity or scope of the Merinos power of attorney.

To construe the lease of June 16, 1906, from Merinos, as attorney in fact of Señora Cruz, to the Pan American Company, the hazard would not be so great; but the validity of this instrument rests upon the authority vested in Adolfo Merinos. Thus in effect the-lease cannot be construed without determination of the effect of the Merinos power of attorney.

Likewise this court is not, in view of the allegations - of the reply, in position to accept the interpretation of the defendants of the instruments of August 21, 1917, and April 28, 1924, and must be aided by proof of Mexican law.

The situation presented is not unlike that referred to in Hurwitz v. Hurwitz, 216 App. Div. 362, 215 N. Y. S. 184, 187, in which it is said: “The real question in this case, as I see it is: Shall the validity of the so-called marriage agreement be disposed of upon a motion for judgment on the pleadings ? I think not. It is true that the learned counsel for the appellants claims that the so-called 'Koshuba’ or marriage contract is illegal and of no effect, but it seems to me that this agreement, being written in the Hebrew language* with the peculiar idioms and characteristics of that language, cannot be properly interpreted without a trial at which the circumstances surrounding its execution and the situation of the parties may be ascertained.”

Indeed, the very interesting argument presented that this court is not forum conveniens indicates the danger involved in any attempt merely on the pleadings to construe these foreign documents and the laws of Mexico in respeet thereto.

As Judge Ward said in Mexican Gulf Oil Co. v. Compania Transcontinental de Petroleo, S. A. (D. C.) 281 F. 148, 165: “About many of these questions, especially of Mexican law, I cannot be confident.”

The defendants urge that the practical construction of the contract given by the parties to it is conclusive against the claim of the plaintiff, and cites Jones v. Canadian National Railways Company (D. C.) 14 F.(2d) 852, 855; Barber Asphalt Co. v. St. Paul (C. C. A.) 224 F. 842, 846; Bunday v. Huntington (C. C. A.) 224 F. 847, 854; Sagamore Iron Co. v. Ash Iron Co. (C. C. A.) 24 F.(2d) 692; 694. This may be conceded and doubtless will have a very important influence in the trial of the action, but it cannot avail the defendants on this motion.

Now as to the proposition that this court is forum non conveniens:

The defendants made a similar motion before Judge Moseowitz, who denied the motion to dismiss, but without prejudice to a' renewal of the motion after the joinder of issue.

Undoubtedly it abundantly appears that questions of Mexican law are involved, and that witnesses residing in Mexico may be called, and one’s first reaction is, perhaps, to question the motive of the plaintiff in seeking this forum; but Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co., 276 U. S. 518, 48 S. Ct. 404, 405, 72 L. Ed. 681, 57 A. L. R. 426, tends rather to limit a court’s inquiry into motive. Mr. Justice Butler said: “The motives which induced the creation of respondent to become successor to its Kentucky grantor and take a transfer of its property have no influence on the validity of the transactions which are the subject of the suit. The succession and transfer were actual, not feigned or merely colorable. In these circumstances, courts will not inquire into motives when deciding concerning their jurisdiction. McDonald v. Smalley, 1 Pet. 620, 624, 7 L. Ed. 287.”

Certainly it does not appear from the. pleadings that plaintiff’s claim, devolving from Señora Cruz and her successors in interest, is feigned or colorable or not actual.

The defendants have submitted an exceedingly interesting study of the doctrine of forum non conveniens, by Paxton Blair, Columbia Law Review, volume 29; No. 1; but the cases discussed in that paper are far from sustaining the proposition that this court should decline jurisdiction of the pending case. Indeed, the author writes: “Confinement of the doctrine to tort eases. In the state of New York, though not apparently elsewhere, there is a marked tendency on the part of the courts when confronted with a suit between non-residents, or suits wherein a non-resident is plaintiff and a foreign corporation is defendant, the cause of action having arisen outside the state, to apply the doctrine of forum non conveniens if the action is on tort, and to refuse to apply it if the action is on contract. The distinction seems firmly established, though its acceptance has not been preceded by any careful, analysis.” Pages 30, 31.

Applying the foregoing test, we find this case is not one of tort but of contract.

Again Mr. Blair writes: “Necessity of showing that some other court has jurisdiction. At the common law it was an established principle that a plea to the jurisdiction of a superior court of general jurisdiction was void unless coupled with an allegation showing that there was some court which was capable of exercising jurisdiction over the cause.” Pages 32, 33.

And so again the test fails, for it does not appear from the pleadings that the Mexican courts would have jurisdiction of the plaintiff corporation.

Of all the authorities cited, that which most clearly approaches in principle the matter involved herein is Mexican Gulf Oil Co. v. Compania Transcontinental De Petróleo, S. A.- (D. C.) 281 F. 148, affirmed on appeal (C. C. A.) 292 P. 846, 848. The comment made by the Circuit Court of Appeals is pertinent:

“This cause, difficult below in most of its aspects, comes here greatly simplified; this, because (1) the learned District Court has filed a comprehensive decision carefully and clearly discussing every essential question in controversy. * * *
“This and other questions of title were decided in favor of plaintiffs, after the court had heard the testimony of experts in respeet of the construction and interpretation of the foreign law, and particularly of the applicable sections of the Civil Code of Yera Cruz. * * *
“To support this conclusion, the court had before it an expert for plaintiff, T. Esquivel Obregon, a lawyer, former Minister of Finance of Mexico and now professor of Latin-Ameriean law at Columbia and New York University, and various provisions of the Yera Cruz Penal Code and Code of Penal Procedure, and the decisions of Mexican courts in Barrera v. Diaz.”

I cannot see that this case presents any greater complications and difficulties than did that tried before Judge Ward.

Accordingly, the motion for judgment on the pleadings .is denied. Settle order on notice.


source: Caselaw Access Project

author: FAKE, District Judge.

license: Public Domain

text:
    LEWINSON v. HOBART SERVICE TRUST CO. OF PASSAIC, N. J. In re ADA DRESS CO., Inc.
    District Court, D. New Jersey.
    April 22, 1931.
    Bilder & Bilder, of Newark, N. J., for complainant.
    Israel B, Greene, of Newark, N. J., for defendant.
   FAKE, District Judge.

The issue here arises on a motion to strike out the complaint upon the ground that the cause of action as set forth therein is not cognizable in a federal court of equity.

At the trial, the complainant abandoned all of the allegations in the complaint, except those contained in counts 2, 4, and 5, thus limiting the issues to allegations charging a preferential payment either in violation of a New York statute in the event that the payment was made in that state, or in violation of a New Jersey statute if the pay■ment was made in that state, and in any event, in violation of the federal Bankruptcy Act (11 USCA).

Motions were made to strike out counts 2 and 4 based upon the state statutes, but for present purposes it is not necessary to pass upon these motions, since a disposition of the motion directed to the equity jurisdiction of this court may dispose of the entire ease.

The relief sought under the complaint is the recovery of the sum of $9,979.14, by the trustee in bankruptcy, on the theory that the said sum was paid by the bankrupt to the defendant on the eve of bankruptcy, defendant having cause to believe that by said payment a preference was intended.

It is contended by counsel for the defendant that the United States District Courts sitting in equity have no jurisdiction to set aside and turn over to the trustee moneys preferentially paid as alleged in the complaint, the issue being cognizable solely at law.

In considering the question thus raised, no decision has been found directly in point ■ by the Judges of our Circuit Court of Appeals, nor by tbe United States Supreme Court. However, tbe First, Second, Fourth, and Seventh Circuit Courts of Appeal have held that federal courts of equity are clothed with jurisdiction to set aside and decree the turnover of money paid by way of preference in violation of the terms of the Bankruptcy Act (section 60 [11 USCA § 96]). See Reed v. Guaranty Security Co. (D. C.) 291 F. 580, and cases therein cited, for the rulings in the First Circuit; Parker v. Black, 151 F. 18, for the Second Circuit; Cox v. Wall (D. C.) 99 F. 546 affirmed 101 F. 403, for the Fourth Circuit; Off v. Hakes, 142 F. 364, for the Seventh Circuit.

It should be noted that the opinion in Parker v. Black, supra, contains the following language: “Upon this point we think we should follow the decisions made by two different Circuit Courts of Appeal upon a state of facts practically identical with those of the present ease, notwithstanding we should have been of a different opinion if the question had been originally presented to us." And again, the same court seven years later in Parker v. Sherman, 212 F. 917, says this: “The ease is on all fours with * * * Parker v. Black, 151 F. 18, 80 C. C. A. 484, where, in order that uniformity in bankruptcy practice in the several circuits might be secured, we followed the decisions of two other Circuit Courts of Appeals, although inclined, had it' been a new question, to take a different view.”

Rulings directly opposed to those contained in the foregoing citations are found in the Sixth and Eighth Circuit Courts of Appeal. See Warmath v. O’Daniel, 159 F. 87, 16 L. R. A. (N. S.) 414, for the ruling in the Sixth Circuit, and First State Bank of Milliken v. Spencer, 219 F. 503, for the ruling in the Eighth Circuit. To the like effect are the rulings by two United States District Court Judges sitting in Pennsylvania, which state is in this (the Third) Circuit, see Sessler v. Nemcof, 183 F. 656, and Rosenthal v. Heller, 266 F. 563.

The lines of departure which mark the sharp conflict in judicial approach between the two groups of eases above cited are explained with such logic and so convincingly are they adhered to by some of the judges, that the question is fraught with much difficulty and cannot be finally settled until it reaches the court of last resort.

Attention is directed to section 267 of the Judicial Code (28 USCA § 384) which provides: “Suits in equity shall not be sustained in any court of the United States in any case where a plain, adequate, and complete remedy may be had at law.” In passing upon this provision in Buzard v. Houston, 119 U. S. 347, 7 S. Ct. 249, 251, 30 L. Ed. 451, Mr. Justice Gray said: “The effect of the provision * * * as often stated by this court, is that 'whenever a court of law is competent to take cognizance of a right; and has power to proceed to a judgment which affords a plain, adequate, and complete remedy, without the aid of a court of equity, the plaintiff must proceed at law, because the defendant has a constitutional right to a trial by jury.’ ” In N. Y. Guaranty Co. v. Memphis Water Co., 107 U. S. 205, 2 S. Ct. 279, 286, 27 L. Ed. 484, Mr. Justice Bradley said of it: “This enactment certainly means something; and, if only declaratory of what was always the law, it must, at least, have been intended to emphasize the rule, and to impress it upon the attention of the courts.”

If this court has jurisdiction in the instant case, that jurisdiction must be traced to an origin in the English courts of equity prior to the year 1789 when the above section of our Judicial Code first took effect, State of Pennsylvania v. Wheeling Bridge, 13 How. 518, 563, 14 L. Ed. 249, or find its origin here in the Constitution or an act of Congress. In the absence of anything directly in point, either in the Constitution or in acts of Congress, our inquiry is confined to an investigation of English sources.

As early as the year 1542, we find what has been said to be the first English Bankruptcy Act.. Stat. 34r-35 Henry VIII, chap. 4, superseded by Stat. 13 Eliz. e. 7, in the year 1570. The latter forms the basis upon which our modern bankruptcy acts have been modeled, and it is noted that the language of 13 Eliz. c. 5 bears marked similarity to the language of our Bankruptcy Act to-day, in so far as preferential payments in contemplation of bankruptcy are concerned. See “The Case of Bankrupts,” Trim 31 Eliz. (1584), Smith v. Miller, 1 Coke’s Reps. 481, and cases there collected.

In view of the history of the experiences with bankruptcy acts in England from 1542 down to the year 1789, it is pertinent and indeed of major importance to ascertain how the English courts were treating with the subject of preferential payments at the time of our severance frorh the mother country, having particular regard for the year 1789 for the reasons hereinbefore stated.

In the case of Rust et al., Assignees of Henry & Richard Papps v. Cooper in the year 1777, 2 Cowp. 629, 98 Eng. Rep. 1277, we find assignees in bankruptcy suing in trover to recover a fraudulent preferential transfer of property made by the bankrupt on the eve of bankruptcy. The jury awarded a verdict for the plaintiff for the value of the goods.

Thompson v. Freeman (1786) 1 Tr. 155, 99 Eng. Rep. 1026, was also an action in trover by an assignee in bankruptcy to recover goods seized under a levy, where it was alleged the judgment was collusive and fraudulent. Neither in this nor in the preceding case was it suggested that the action might be brought in equity. Indeed, in the arguments on rules.in arrest of judgments, the actions at law seem to have been so well established that the question of jurisdiction was not touched upon. Other instances of actions at law to recover preferences in the English courts a few years after 1789 are Barnes v. Freeland (1794) 6 Tr. 80, 101 Eng. Rep. 447; Smith v. Payne (1795) 6 Tr. 152, 101 Eng. Rep’. 484, and we find Lord Chancellor Loughborough, in Ex parte Scudamore (1796) 3 Ves. 280, 30 Eng. Rep. 907, directing an action at law to recover a preference. He said: “You are applying on behalf of the assignees desiring me to direct the money to be paid over. I do not think I can make that order. * * ’s Let an action be brought against Haverfield if the parties shall think proper.” The facts here showed that one Williams held moneys in trust for Haverfield, and it was contended that the trust amounted to a fraudulent preference. At that time the Chancellor appointed the bankruptcy commissioners, and the matter appears to have come before him by virtue thereof.

Under the Stat. of 13 Eliz. C. 5, it was not the practice to resort to equity to set aside a fraudulent conveyance. The creditor proceeded as though no conveyance had been made, and execution on his judgment ran against the property with like force and effect as though the transfer had no existence. See Glenn on Creditors Rights and Remedies, page 58.

In commenting on the jurisdiction of equity courts to set aside a fraudulent transfer of goods, Baron Parke .said, in the year 1843: “Equity jurisdiction * * * we apprehend has arisen in comparatively modern times.” Imray v. Magnay, 152 Eng. Rep. 803. We are not concerned here with the concurrent jurisdiction of equity to set aside fraudulent conveyances of real property, since this forms an interesting subject in itself.

Many eases arising in the Court of Chancery of New Jersey have been cited by counsel for complainant in the instant case. There is no doubt but that in equity in New Jersey such an action as this might well be instituted, but in the federal courts we are limited by the Judicial Code which does not confine the Chancellor and Vice Chancellors of the state court. This limitation on the federal court and the freedom of the state court from it are mentioned by Mr. Justice Dixon in Eggers v. Anderson, 63 N. J. Eq. 264 at page 271, 49 A. 578, 55 L. R. A. 570. See, also, Kuntz v. Tonnele, 80 N. J. Eq. 373, 84 A. 624, and cases therein discussed by Vice Chancellor Garrison.

The conclusion here is that the English Court of Chancery was not exercising jurisdiction to set aside preferential transfers of personal property prior to 1789, except possibly in cases of equitable assets not subject to levy under 13 Eliz. C. 5, sinee(it was at that time well established that an adequate remedy existed at law and, therefore, no such jurisdiction then attached to our federal courts of equity. Had the English courts been exercising such jurisdiction, our federal courts would have been ousted of it by virtue of the clear prohibition in section 267 of the Judicial Code. The scope and effect of executions issued on judgments at law have been greatly enlarged in recent years. This, again, further limits the federal equity jurisdiction, since here the remedy is contemplated as the major factor in ascertaining jurisdiction. Obviously, this court cannot, either for the furtherance of uniformity, the promotion of comity, or for mere expediency, enlarge upon that jurisdiction to which we are by statute confined. This means there is no concurrent jurisdiction here as between equity and law such as exists in the state courts of New Jersey and in the courts of other states. ■ ,

Where a plain, adequate, and complete remedy at law exists, the suit must be instituted in the law court, and such remedy does exist covering the cause of action outlined in the complaint herein.

No question is raised here-as to whether or not jurisdiction may be assumed where objection is not seasonably made; that point is, therefore, not passed upon in this opinion.

A decree will be entered against the complainant in conformity with these views.


author: HAZEL, District Judge.

text:
    ELECTRICAL ENGINEERS EQUIPMENT CO. v. CHAMPION SWITCH CO.
    District Court, W. D. New York.
    Feb. 10, 1931.
    Charles A. Brown, of Chicago, 111., for plaintiff.
    William S. Hodges, of Washington, D. C., and Daniel J. Kenefiek, of Buffalo, N. Y., for defendant.
   HAZEL, District Judge.

Exceptions of the defendant to the master’s findings relate (1) to profits awarded plaintiff on the patented disconnecting switches described in letters patent No. 1,-212,161 to Frank E. Getts, and No. 1,515,116 to Ernest H. Jacobs, including bases and insulators not invented by either of the patentees; and (2) to refusal by the master to make deductions arising from losses suffered from sales of the infringing switches made by defendant. Plaintiff does not ask damages. No exceptions have been filed relating to defendant’s Tidewater switch (Exhibits K and B) and third type switch (Exhibit E), which types, the master decided? did not come within the scope of the patents-in suit. We are therefore concerned herein, solely with the profits made by defendant on its manufacture and sale of infringing switches of Plaintiff’s Exhibit A type, which the master found amounted to $23,219.27.

The corrected report of the master, relating to the profits earned by the Champion Switch Company on the manufacture and sale of the disconnecting switches (Exhibit A), has been considered by me in connection with the exceptions thereto and the arguments in support thereof. I have reached the conclusion that the master in his complete and able report has accurately applied the law to the evidence adduced before him. I can add little thereto. I will, however, as briefly as possible, state my views with relation to the argument made at the hearing for confirmation. First, as to the asserted losses. I do not think that losses resulting, for instance, from sales of the disconnecting switch, including the blade assembly, below cost of manufacture, were deductible from the profits.

The ease of Canda Bros. v. Michigan Mallcable Iron Co. (C. C. A.) 152 F. 178, contains an interpretation of the Cawood Patent, 94 U. S. 710, 24 L. Ed. 238, and Providence Rubber Co. v. Goodyear, 9 Wall. 788, 19 L. Ed. 566. It was there said, on the authority of the two eases cited, that, though losses occurring concurrently with the profits are to be taken into account, yet the general statement of the Supreme Court should be limited by the facts of the ease in which they are expressed to harmonize the statement with the law as declared in Crosby Steam Gage & Valve Co. v. Safety Valve Co., 141 U. S. 453, 12 S. Ct. 49, 35 L. Ed. 809. As pointed out by the master in this ease, the entire commercial value of the valves in the Crosby Case was attributable to the patented improvement, and any losses resulting from unlawful invasion were neither chargeable nor deductible from the profits on sales. This, I think, was a correct understanding of the law; for, if switches during any period were sold at a loss — part having been sold at a profit — the losses cannot be set off against the profits.

Aside from Walker on Patents (6th Ed.) § 754, and the Crosby Case, there are other adjudications holding that, where profits in part were realized on sales of an infringing device and some losses sustained, the patentee has the-right to recover the profits without setting off or deducting the losses. And in Starr Piano Co. v. Anto Pneumatic Action Co., 12 F.(2d) 586, the Circuit Court of Appeals, Seventh Circuit, ruled that it was not error for the master, on cessation of infringement, where defendant’s books showed a loss for a calendar year, to exclude that year from the profit accounting without giving ■defendant credit for the loss as against profits of prior years; and in general the' court said that there was no unfairness in requiring the infringer to sustain losses incurred in other transactions. See, also, Elizabeth v. Paving Co., 97 U. S. 126, 24 L. Ed. 1000, and McKee Glass Co. v. H. C. Fry Glass Co. (C. C. A.) 248 F. 125, 128. In the latter ease, the Circuit Court of Appeals for the Third Circuit said: “* * * Against the defendant’s contention that the complainant was entitled only to net profits on all sales after deducting losses on some from profits on others, the master held, we think correctly, that, as the complainant was not a quasi partner of the infringers, losses incurred by the defendants through their wrongful invasion of the complainant’s patent were not chargeable to the complainant (Crosby Valve Co. v. Safety Valve Co., 141 U. S. 441, 12 S. Ct. 49, 35 L. Ed. 809), and, therefore, the complainant .was entitled to all profits realized by the defendants without deduction of any losses they had sustained.”

The profits computed by the master were the net profits ascertained after deducting the cost of manufacture, labor, overhead, and various other items. The asserted losses on sales, amounting to $15,462.59, were not before the master in detail, and were commingled with the profit items, and it suffices to say that they must be borne by the infringer. See, also, Steam, etc., Co. v. Windsor Mfg. Co., Fed. Cas. No. 13336, and Graham v. Mason, Fed. Cas. No. 5672.

Second, as to the profits. The solution of the question whether plaintiff is entitled to the profits of the disconnecting switch which included bases and insulators, old devices in the art, or whether the accounting is to be limited to the blade assembly alone, ■depends upon the material facts. The blade assembly eoncededly was the essential feature of both patents in suit, and the base and insulator were subsidiary. The evidence shows that the blade assemblies, save in a few instances, were not commercially salable, and were in fact sold to the trade in most instances in conjunction with the insulator and base attachment. Although the blade assembly at times, on request of buyers, was sold separately, the purchasers presumably adapting their own bases, the ordinary sales included the base and insulator to enable the switches to function properly. I do not accept the interpretation of the testimony of Stinson and Jacobs, tendered by defendant’s counsel, that orders were continuously received for the infringing switches without the base and insulator, or that it has become a practice to make purchases of the patented switches alone. On the contrary, the evidence preponderatingly shows that the switches, in combination with the blade assemblies and base and insulator instrumentalities upon which the blade assemblies rested, were usually sold as unitary structures. In this relation I find that defendant has not satisfactorily shown that any part of the profits were separately realized from the sale of the bases and insulators, for the salability of the switches in combination with bases and insulators, old in the art, were primarily due to the blade assembly elements covered in the claims in suit; and hence no substantial ground exists for segregation or apportionment of the profits.

It seems to me .that the principle announced in Westinghouse v. Wagner, 225 U. S. 604 (see sub. b, page 614), 32 S. Ct. 691, 694, 56 L. Ed. 1222, 41 L. R. A. (N. S.) 653, controls the disposition of the controverted question. The elimination of gains and profits on bases and insulators under classification (d) in the Westinghouse opinion is not maintainable, since the patented inventions in issue were not used in combination with other infringing patents or valuable improvements which contributed to the profits. Plaintiff’s theory is that the gains are shown to have eventuated from the manufacture and sale of its switches as a unit, regardless of old elements combined therewith. Such was the view of the master, and there is insufficient evidence upon which to determine that he erred. Davis v. Schwartz, 155 U. S. 631, 15 S. Ct. 237, 39 L. Ed. 289; Central Trust Co. v. Texas Co. (C. C.) 32 F. 448. This is not a case where the patented switches were minor or subsidiary parts in combination with the bases and insulators, for the latter were merely auxiliary to the former. It seems to me that Judge Wallace in Wales v. Waterbury Mfg. Co. (C. C. A.) 101 F. 126, 129, and cases there cited, notably his excerpt from Goulds Manufacturing Co. v. Cowing, 105 U. S. 255, 26 L. Ed. 987, to the effect that one must look to the advantages derived from using the patented invention, “beyond those he might derive in using other instrumentalities open to the public,” covers the present situation. In defendant’s infringing switches the elements of the claims in issue were embodied and alone rendered the switches commercially salable; while the added parts were more or less incidental thereto. It was not possible to secure from defendant’s books, on examination, a precise segregation of the selling price and costs of the blade assembly, in order to determine correctly the profits of separate parts. This indicates that defendant’s sales were made as a unitary structure.

Many other adjudications are cited in the briefs, but it is unnecessary to go further. It is therefore determined that the total gains and profits made by defendant and advantages secured by its manufacture and sale of plaintiff’s switch (Exhibit A) resulted from the unlawful appropriation of the structure as a whole.

The exceptions are overruled. Plaintiff may enter a decree confirming the report of the master.


author: KIRKPATRICK, District Judge.

text:
    ALLIANCE INS. CO. OF PHILADELPHIA v. MacLAUGHLIN, Collector of Internal Revenue. INSURANCE CO. OF PENNSYLVANIA v. SAME.
    Nos. 15700, 15702.
    District Court, E. D. Pennsylvania.
    March 10, 1931.
    Edward M. Biddle and Robert T. Mc-Cracken, both of Philadelphia, Pa., for plaintiffs.
    Paul Freeman, Asst. U. S. Atty., of Philadelphia, Pa., and E. H. Horton, Gen. Counsel, Internal Revenue Bureau, of Washington, D. C., for defendant.
   KIRKPATRICK, District Judge.

In these two actions at law the plaintiffs are suing to recover income taxes paid by them for the calendar year 1928. The cases are before the court upon statutory demurrers which, under the Pennsylvania Practice Act (12 PS § 382 et seq.), admit all the facts pleaded, and the single issue in both cases is whether the assessment and collection of the taxes were legal.

The plaintiffs are stock fire insurance companies incorporated under the laws of Pennsylvania and conducting the usual business of fire insurance companies. The taxes were assessed under the Revenue Act of 1928 (26 USCA § 2001 et seq.), and were based upon gain accruing to the plaintiffs from the sale during the year 1928 of securities owned by them, and acquired prior to January 1, 1928.

The question involved is whether, in computing the amount of such gain, the basis to be used should be the fair market value of the property on March 1, 1913, or the cost if acquired after that date, and not the fair market value as of January 1, 1928, the effective date of the Revenue Act of 1928.

To see how the question arises it will first be necessary to review briefly the legislation bearing upon the question. The Revenue Act of 1913 and the subsequent Acts of 1916, 1917, and 1918 taxed all insurance companies in the same manner as corporations generally, and under these acts, gains derived from the sale or other disposition of property were taxable as income. The Revenue Act of 1921 (42 Stat. 227, 262, 263}, however, established an entirely new scheme for the taxation of insurance companies, and, in sections 246 and 247, dealt specifically with insurance companies other than life and mutual. By the provisions of these sections such companies (which of course included stock fire insurance companies) were no longer subject to taxation, upon gains from sales or other disposition of property, nor were they permitted to deduct losses sustained in like manner. The Revenue Acts of 1924 and 1926 re-enacted substantially tbe provisions of sections 246 and 247 of the Act of 1921. Thus from January 1, 1921, until January 1, 1928, stock fire insurance companies were not subject to a tax upon gains derived from the sale of their property.

The attention of Congress was directed to this somewhat mysterious omission and the inequality which it produced between stock fire, casualty, and marine insurance companies on the one hand and mutuals on the other. As a result, in the Revenue Act of 1928 a clause taxing gains derived from the sale of property was added to the existing. provisions for taxing insurance- companies other than life or mutual, and the following provision of the Revenue Act of 1928 was enacted as part of section 2-04 (26 USCA § 2204):

“(a) Imposition of tax. In lieu of the tax imposed by section 2013 of this title, there shall be levied, collected, and paid foi each taxable year upon the net income of every insurance company (other than a life or mutual insurance company) a tax as follows:
“(1) In the ease of such a domestic insurance company 12 per centum of its net-income. * * *
“(b) Definition of Income, Etc. In the case of an insurance company subject to the tax imposed by this section—
“(1) Gross Income. ‘Gross income’ means the sum of (A) the combined gross amount earned during the taxable year, from investment income and from underwriting income as provided in this subsection, computed on the basis of the underwriting and investment exhibit of the annual statement approved by the National Convention of Insurance Commissioners, and (B) gain during the taxable year from the sale or other disposition of property. * * * ”

The Revenue Act of 1928 deals with insurance companies, including those here involved, in supplement C. The general provisions of the act appear in subtitle A, subtitle B, and in supplements A, B, C, and D of subtitle C. Section 4 of subtitle A (26 USCA § 2004) is as follows: “The application of the General Provisions and of Supplements A to D, inclusive, to each of the following special classes of taxpayers, shall be subject to the exceptions and additional provisions found in the Supplement applicable to such class. * *

Section 113 (a) and (b) of the act appearing in supplement B (26 USCA § 2113 (a,b) is as follows:

“(a) Property Acquired After February 28, 1913. The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property * * * [with certain exceptions which are not here pertinent].
“(b) Property Acquired Before March 1, 1913. The basis for determining the gain or loss from the sale or other disposition of property acquired before March 1, 1913, shall be:
“(1) The cost of such property (or, in the case of such property as is described in subsection (a) (1), (4), (5), or (12) of this section, the basis as therein provided), or ,
“(2) The fair market value of such property as of March 1,1913, whichever is greatgj. * * *

The government’s contention is simply that, since there are no exceptions or additional provisions in section 204 (26 USCA § 2204), or, for that matter, anywhere in supplement G, affecting the basis for determining gain or loss of stock fire, casualty, or marine insurance companies, section 113 was intended to apply and to furnish the basis. It is further argued that only by so holding can stock insurance companies of the classes referred to be placed upon a parity with mutuals, since the latter, in case of property sold during 1928, must compute the gain on the basis of its 1913 value.

But the statute (title 1 of the act [26 USCA §§ 2001 to 2322]) is an income tax law. The predominant intention running through all provisions is to tax income only. The Sixteenth Amendment is a grant of power to lay taxes upon incomes, and the presumption is that Congress intended to act within its constitutional limits. Whatever may be read into the act by implication must yield to a construction which will uphold the act, unless a contrary intention is so clearly indicated as to make any other interpretation impossible with reason. This is the basis of the plaintiffs’ position, for they say that the construction contended for by the government would result in imposing a tax upon something not income at all, but an accrual to capital matured before the passage of the act.

A review of decisions under the Corporation Excise Tax Act of 1909 (Act Aug. 5, 1909, c. 6, 36 Stat. 112, § 38) sustains the plaintiffs’ view. These decisions in principle apply to the instant ease, because the word “income” has the same meaning in the Income Tax Act that it had in the Corporation Excise Tax Act of 1909. Merchants’ Loan & Trust Co. v. Smietanka, 255 U. S. 509, 41 S. Ct. 386, 65 L. Ed. 751, 15 A. L. R. 1305.

In Doyle v. Mitchell Bros. Co., 247 U. S. 179, 38 S. Ct. 467, 468, 62 L. Ed. 1054, it was decided that an increase in value of corporate assets, the whole amount of which had accrued prior to January 1, 1909, the effective date of the act, was not taxable, although converted into money during the year 1909 at a price in excess of its value when acquired (which happened to be in 1903). The court said:

“An examination of these and other provisions of the act makes it plain that the legislative purpose was not to tax property as such, or the mere conversion of property, but to tax the conduct of the business of corporations organized for profit by a measure based upon the gainful returns from their business operations and property from the time the act took effect. * * *
“The formula that the entire receipts derived from a conversion of capital assets after deducting cost value must be treated as net income, so far as it is applied to a conversion of assets acquired before the act took .effect and so as to tax as income any increased value that accrued before that date, finds no support in either the letter or the spirit of the act, and brings the former into incongruity with the latter. * * *
“In order to determine whether there has been gain or loss, and the amount of the gain if any, we must withdraw from the gross proceeds an amount sufficient to -restore the capital value that existed at the commencement of the period under consideration.
“This has been recognized from the beginning by the administrative officers of the government.”

In Hays v. Gauley Mountain Coal Co., 247 U. S. 189, 38 S. Ct. 470, 472, 62 L. Ed. 1061, the question was as to the basis for determining income under the act of 1909 in case of securities of another company purchased in 1902 and sold in 1911 -at a large profit. It was held that so much, and only so much of the increase in value of the shares as could be deemed to have accrued after December 31, 1908, was part of the company’s gross income within the meaning of the act. In the opinion, the court said: “ * ‘ * The general purpose of the act of 1909 to measure the tax by the increase arising from corporate activities together with the income from invested property leads to the inference that that portion of the gross' proceeds which represents gam or m crease acquired after the taking effect of the act must be regarded as ‘gross income’; and to this end it must be distinguished from that portion which represents a return of the capital value existing before. In order to do this, it is necessary to ascertain what was the value of the capital assets on December 31, 1908.”

These decisions rule the instant ease unless they have been subsequently overruled or modified. The government contends that the case of Merchants’ Loan & Trust Co. v. Smietanka, 255 U. S. 509, 41 S. Ct. 386, 65 L. Ed. 751, 15 A. L. R. 1305, taken in connection with the ease of Smietanka v. First Trust & Savings Bank, 257 U. S. 602, 42 S. Ct. 223, 66 L. Ed. 391, has just such effect, because (the government says) these two decisions deal with a situation exactly parallel to that involved in the instant cases, though the subject-matter was a different tax — income tax payable by trustees.

The second case (Smietanka v. First Trust & Savings Bank, supra), which was decided under the Income Tax Act of 1913 (38 Stat. 114), and therefore should be read first, holds merely that the Income Tax Act of 1913 made no provision for taxing income held and accumulated by a trustee for unborn - or unascertained beneficiaries. The first case (Merchants’ Loan & Trust Co. v. Smietanka, supra) arose under the later Acts of 1916 and 1917 (39 Stat. 756 and 40 Stat. 300). The question involved was the legality of a tax upon gain realized by a trustee who, on February 2, 1917, sold assets acquired prior to March 1, 1913. The trust arose under the will of a decedent who died in 1912 leaving a widow and four children, the provision of the will being that the income was to be paid to the widow during her life and after her death to be used for the benefit of the children or their representatives until each should arrive at the age of twenty-five when each should receive his or her share of the trust fund. The widow and the four children were all living in 1917. Thus it will be seen that all the beneficiaries were and at all times had been in esse and ascertained. The Supreme Court sustained an assessment , based upon the difference between the amount realized in 1917 and the March 1,1913, value.

Although the court in the opinion referred to the fact that the act of 1916 specifically levied a tax upon income accumulated in trust for the benefit of unborn or unascertained persons, this provision was mentioned only as showing the .intention of Congress to treat the trustee as a “taxable person.” That was the real point in the case, because the tax in its entirety had been assessed against and paid by the trustee and not by the beneficiaries, either life tenant or remaindermen. As applicable to a trust in which the beneficiaries were in esse and ascertained, the two decisions establish no more than this: Prior to the acts of 1916 and 1917 no tax upon gains realized from sale of property and remaining undistributed in the hands of the trustee could have been assessed against the trustee. After the acts referred to, the trustee was a taxable person and liable for the tax.

The decision in Merchants’ Loan & Trust Co. v. Smietanka does not touch the question whether] if the tax had been assessed against the beneficiaries, it could have been sustained without resort to the acts of 1916 and 1917, or, to put it in another way, whether, if the sale had occurred pripr to 1916, the beneficiaries could have been taxed under the act of 1913. This seems to me to be the crux of the whole question here, because, if gain realized in the sale of securities by a trustee had at all times since the act of 1913 been taxable against the beneficiaries, then the effect of the acts of 1916 and 1917 was simply to transfer the incidence of the tax to the trustee. This was really not levying a new tax, and therefore it would follow that the decision would have no bearing upon the instant case, for there is no dispute that the Revenue Act of 1928 levied an entirely new tax.

Now it seems clear enough to me that the tax involved in Merchants’ Loan & Trust Co. v. Smietanka could, prior to the acts of 1916 and 1917, have been assessed, partly at least, against the beneficiaries. The Act of 1913 (38 Stat. 168, § 2D) provided specifically that “ * * * trustees • * * shall make and render a return of the net income of the person for whom they act, * * * ” and that trustees should deduct the normal tax on the income and pay it to the United States, the surtax to be paid by the beneficiaries. The reason the trust estate in the ease of Smietanka v. First Trust & Savings Bank escaped taxation was that there was no person in existence for whom the trustee aeted. In the other case (Merchants’ Loan & Trust Co. v. Smietanka) the persons for whom the trustee acted were in existence and were undoubtedly taxable. The fact that the income was not distributed need not have caused any difficulty, since it would have been simple enough to apportion the gain among the beneficiaries so that they could be assessed with the surtax.

It is evident that the Supreme Court never intended nor understood the decision in Merchants’ Loan & Trust Co. v. Smietanka, to rule that an increase in value accruing prior to the effective date of the act imposing the tax should be included in the taxable gain. Thus in Goodrich v. Edwards, 255 U. S. 527, 41 S. Ct. 390, 391, 65 L. Ed. 758, a tax was assessed upon gain measured by an increase over the market value as of March 1, 1913 (the effective date of the act under which the tax was assessed), though the property had been purchased several years earlier at a much lower figure. The court said: “It is plain that this assessment was on the profit accruing after March 1, 1913, the effective date of the act. * * * The question involved is ruled by No. 608, supra [Merchants’ Loan & Trust Company v. Smietanka], and the amount was properly taxed.”

Of course, if it appeared clearly and unequivocally from the terms of the act of 1928 that Congress intended to apply the measure" for gains, provided for by section 113 (26 USCA § 2113), to insurance companies of the plaintiff’s class, the question of constitutionality would have to be met. But there are many things in the language and structure of the act of 1928 which strongly suggest that Congress did not so intend, and I cannot agree that the conclusion that section 113 was intended to apply to the tax imposed by section 204 (b) (1) (B), 26 USCA § 2204 (b) (1) (B), is necessary, or even permissible. The tax imposed by section 204 is expressly stated to be “in lieu of the tax imposed by section 2013 of this title.” Section 13 (26 USCA § 2013) imposed a 12 per cent, tax on the net income of corporations generally, which is the amount imposed by section 204, and the effect of the phrase quoted'above is to emphasize the intention to make section 204 a scheme or code of taxation, complete in itself, applicable to insurance companies other than life or mutual without reference to the general provisions of the act. No other reason can be suggested fór providing that a tax of 12 per cent, should be “in lieu of” a tax at the same rate already fixed for corporations generally.

This intention appears more clearly when section 204 (26 USCA § 2204) is examined in all its parts. Whenever it was intended to incorporate into section 204 any of the general provisions of the act, such provisions were specifically referred to and included by express language.

For the reasons stated, I hold that the basis for determining gain upon which the assessment was made in the case of Alliance Insurance Company of Philadelphia v. Joseph S. MacLaughlin", Collector of Internal Revenue for the First District of Pennsylvania, is not authorized by law. The affidavit of defense is therefore held to be insufficient, and judgment may be entered for the plaintiff in that case in the amount claimed, with interest.

It is my opinion that the said clauses of the Revenue Act of 1928 when construed in keeping with the foregoing opinion are constitutional. For this reason I hold that the affidavit of defense in the ease of The Insurance Company of the State of Pennsylvania v. Joseph S. MacLaughlin, Collector of Internal Revenue for the First District of Pennsylvania, is sufficient, and judgment may be entered therein for the defendant.


author: GRONER, District Judge.

text:
    THE METMUZEL.
    District Court, E. D. Virginia.
    July 31, 1930.
    Samuel E. Forwood, of Norfolk, Va. (Louis Halle, of New York City, and Ralph H. Daughton, of Norfolk, Va., on the brief), for claimant.
    H. H. Rumble, Sp. Asst, to Atty. Gen. (Paid W. Kear, U. S. Atty., of Norfolk, Va., on the brief), for the United States.
   GRONER, District Judge.

The United States filed their libel against the oil serew Metmuzel and a cargo of 1,103 hags of bottled whisky, alleging violation of sections 585, 584, and 594 of the Tariff Act of 1922 (19 USCA §§ 486, 487, 498). One William Miller, residing in St. Pierre, Miquelon, duly appeared and filed a claim to the said vessel and an answer denying the allegations of the libel, and specially that there was any violation on the part of the said vessel of the laws of the United States, and praying a dismissal of the libel.

The evidence was heard in open court today and shows substantially as follows: About 10 o’clock p. m. of June 1, 1930, the Metmuzel was discovered by officers of the Coast Guard vessel C. G. 200 near Parramore Bank Gas Buoy, without lights, and approximately six miles from the shore line of the Virginia coast of the United States. The Coast Guard vessel sounded her Klaxon and started in pursuit, whereupon the Metmuzel' increased her speed and changed her course, heading to the right and toward the open sea. The chase continued only about ten or fifteen minutes and terminated when the Coast Guard vessel fired a shot. The Metmuzel was boarded, and her master, at the demand of the boarding officer, produced a paper showing that she had cleared from St. Pierre, Miquelon, on May 19, 1930, that her destination was “the high seas,” and that her cargo consisted of “one lot of general merchandise and sea stores,” without any record of consignor Or consignee. The Metmuzel was seized and brought into port and delivered into the custody of the Collector of Customs of the Fourteenth Collection District at Norfolk, Va. Her cargo of liquor was appraised at $39,725 and a penalty of $500 assessed against the vessel for failure to produce her manifest when demanded by the customs officers, and a further penalty of $39,725, the value of her cargo, for failure to manifest the same. In addition to these penalties, the government is asking the forfeiture of the vessel for violation of the act of Congress requiring a vessel, within the limits of a collection district, not to attempt to depart therefrom without making a report or entry under the provisions of the United States laws. Tariff Act of 1922, § 585 (19 USCA § 487).

Except the claim of ownership of the vessel and cargo, there was no evidence received during the trial on behalf of the claimant. The evidence on behalf of the government shows the facts above outlined and, in addition, a statement made by the master of the Metmuzel to one of the customs officers that his purpose and intention at the time of the seizure was to cruise off Parramore Gas Buoy until met by a vessel which would identify herself by calling the name “Miller” and into which he would unload his cargo. He added in the event he failed to make contact with this vessel at the agreed rendezvous he was to go to sea and cruise around until contact was established.

The question which I have to determine is whether, under these facts, the penalties were properly assessed, and, if they were, whether in addition forfeiture of the vessel should be decreed.

There is no doubt that the manifest produced by the master, which a careful search showed was the only manifest aboard the Metmuzel, did not comply with the laws of the United States (see U. S. Code, title 19, § 241 [19 USCA § 241]), but unless the Metmuzel was bound to the United States this law has no relevaney. Obviously if she intended to‘ discharge her cargo within the United States, she was bound to the United States, and the first question is whether the evidence discloses sufficient facts upon which to determine that her real purpose was to discharge her cargo of contraband in the United States.

The paper which was produced on the demand of the Coast Guard officer showed she was bound for the high seas. The evidence discloses that at the time of her seizure she was within four marine leagues of the United States and that Parramore Gas Buoy, at which point her master admitted it was his purpose to form contact with another vessel for the purpose of discharging his cargo into the latter, was located between six and seven miles off the coast of the United States.

It is no longer1 open to debate that a vessel intending to discharge her cargo within the territorial waters of the United States is bound to the United States. It has likewise been held that a vessel intending to discharge into contact boats within four leagues of the coast, without herself entering territorial waters, is bound to the United States, and in the comparatively recent ease of The Marion Phillis, 36 E.(2d) 688, 689, decided by the Circuit Court of Appeals, Second Circuit, December, 1929, it was held that the phrase “bound ,to the United States” should be interpreted to describe a vessel whose cargo was destined for transfer to smugglers outside the twelve mile limit. It seems to me therefore perfectly clear that following this line of authorities, the question propounded in this ease must be determined against the Metmuzel and it would simply be to shut one’s eyes to the obvious to argue or suggest that there was any other purpose from the time of the commencement of her voyage to the time of her seizure than the landing of her cargo, either directly or indirectly, on the shores of this country. This results from all the facts and circumstances surrounding her voyage and her location at the time of seizure and, of course, the character of cargo which she was carrying, but it results also from the statement of her master that it was, in fact, his intention to discharge his cargo into a vessel which, obviously, was to come out from the United States for that purpose and return to the United States with the contraband.

In this view of the case it follows that the penalties were properly assessed. There was no consignee of the cargo or, at least, nothing to show who the consignee was. The paper surrendered by the master of the Metmuzel is certainly not susceptible of interpretation as a denial of the full control by the master of the cargo. The ship was at sea, the master was in control, and though doubtless he may have been himself controlled by private orders or instructions, yet physically he had the absolute dominion of the vessel and the cargo and was not bound by any papers, which the law required him to have aboard, to exercise any other control than his own will with relation to the disposition of the cargo. The burden of proof of showing differently was on the claimant. That burden has not been met.

This whole subject may be found discussed at length in the case of Gillam v. U. S., from this circuit, reported in 27 F. (2d) 296.

The enforcement of the penalties will therefore be decreed, as well as the forfeiture of the cargo, both because the same was not properly manifested and because consigned to the master.

This leaves only for consideration the question of the forfeiture of the vessel. This is claimed under section 585 of the Tariff Act of 1922 (U. S. Code, title 19, § 487 [19 USCA § 487]), which provides that if any vessel from a foreign port arrives within the limits of any collection district and departs or attempts to depart except from stress of weather, etc., without making report or entry, the vessel shall be subject to forfeiture. It has been decided that this section has -no applicability to the case of a vessel accidentally coming into the territorial waters of the United States, within a collection district, or to the case of a vessel which takes refuge at a port of the United States, but those exceptions are not involved in this case, for, as I have already shown, the Metmuzel was bound to the United States and intended that her cargo should be landed on our shore, but since admittedly she was seized outside the three-mile limit and within the twelve-mile limit, the question is whether or not her intention, plus her then location, is sufficient to bring her within the collection district. The executive order establishing the Fourteenth collection district describes the ports of entry included within that designation. It makes no attempt to embrace the waters of the sea or to define any limit with relation thereto. Undoubtedly the United States has complete dominion and sovereignty over the waters within three miles of the coast line and it has certain other jurisdiction for a distance of twelve miles. This jurisdiction has been recognized to include the enforcement by the United States of their revenue and customs laws. For that purpose therefore a vessel within twelve miles of the coast is as amenable to the revenue and customs laws as within three miles. It would be absurd, it seems to me, to say that a vessel intending to smuggle contraband merchandise into the United States could lay outside the three-mile limit and discharge her contraband in small boats and avoid the penalties in such eases prescribed against smuggling. In the present ease the Metmuzel was outside the three-mile limit but within the twelve-mile limit, for the purpose of landing her cargo in the United States. For that reason I have held the enforcement of the penalties against her valid.

May she also be said to have arrived within the limits of the collection district? The question is new but it seems to me to answer itself. If the authority of the customs collection district extends outside the three miles for the purpose of enforcing the laws, it extends equally far for the purpose of determining the arrival of a vessel within its jurisdiction. This, it seems to me, is the effect of the decision of the Circuit Court of Appeals in The Javirena, 67 F. 154. In that case a Spanish fishing vessel was seized within five miles of the Florida mainland, partly loaded with fish and with wine. There was no charge of smuggling or attempting to smuggle, nor was it charged that she had communicated with shore. Her master testified he had anchored for the purpose of repairing her rigging. In dismissing the libel, the court there held that the purpose with which she arrived was the guiding principle, that is to say, that if her purpose was either accidental or lawful, the statute was not offended but that, if it were other-was not offended but that if it were otherwise it was, and that the jurisdiction concededly of the collection district extended beyond the three-mile limit and within the twelve-mile limit. And so in U. S. v. Bengochea, 279 F. 537, 541, it was held by the same Circuit Court of Appeals, referring to The Javirena, that because of the failure to show anything unlawful on the part of that vessel the statute did not apply and, for that reason alone, she was held “not liable to the penalty for departing from the collection district without making a report or entry.”

The conclusion I reach is that any vessel bound for the United States and coming within twelve miles of the coast line of the United States is required to obey its laws and is amenable to those laws within those limits, that the territorial jurisdiction of the customs collection district extends as far as the laws are applicable, that is to say, within four marine leagues, and that a vessel located within that area has arrived within a collection district, and unless she is able to show that either stress of weather or some other exception contained in the statute exempts her from its provisions, the statute makes it her duty to comply with all of its provisions.

The Metmuzel was within six miles of the coast. Her purpose, as I have shown, was to land her caygo unlawfully into the United States, and, in contemplation of law,' she had arrived within the collection district, and was therefore prohibited from departing therefrom without making a report or entry. At the time of her overhauling she was unquestionably seeking to escape. It cannot be doubted, therefore, that she was leaving without reporting, and thus was violating section 487.

A decree may therefore be entered for the penalties assessed for the forfeiture of the cargo- and likewise for the forfeiture of the vessel.

It is regretted that on account of the necessity of the disposition of the ship- and cargo and therefore of an immediate decision of the case, it is impracticable to discuss this matter at greater length and likewise makes necessary a hurried preparation of my views.


author: PARKER, Circuit Judge.

text:
    THE METMUZEL. MILLER v. UNITED STATES.
    No. 3119.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.
    Samuel E. Norwood, of Norfolk, Va. (Louis Halle, of New York City, and Ralph H. Daughton, of Norfolk, Va., on the brief), for appellant.
    H. H. Rumble, Sp. Asst, to Atty. Gen. (Paul W. Kear, U. S. Atty,, of Norfolk, Va., on the brief), for the United States.
    Before PARKER and NORTHCOTT, Circuit Judges, and GLENN, District Judge.
   PARKER, Circuit Judge.

This is an appeal from a decree of the court below [49 F.(2d) 365] assessing penalties of $500 and $39,725, the value of unmanifested cargo, against the master of the French oil screw Metmuzel under section 584 of the Tariff Act of 1922 (19 USCA § 486) , condemning the vessel under section 594 (19 USCA § 498) for the payment of the penalties so assessed, and decreeing her forfeiture under section 585 (19 USCA § 487) . The decree was entered upon a libel of information filed by the United States, after the vessel had been seized and brought into port by officers of the Coast Guard. The libel charged violation of the provisions of the Tariff Act which require vessels bound for the United States to have a manifest of cargo, to produce and deliver same to the ■ officers of the Coast Guard upon demand, and not to depart or attempt to depart from any collection district without making entry. One William Miller intervened and filed answer claiming the vessel and cargo; and from the decree below he has appealed to this court.

The facts may be briefly stated. About 10 o’clock in the evening of June 1, 1930; the Metmuzel was discovered by a vessel of the Coast Guard near Paramore Bank Gas Buoy, and within six miles of the shore of the United States, running without lights and headed for the shore. The Coast Guard vessel hailed her, whereupon she turned about and put out to sea. A chase followed, which was ended by the vessel of the Coast Guard firing upon her. She then hove to and officers boarded her and demanded production of her manifest. Her master produced no manifest but a clearance certificate, called “manifest of clearance” issued at St. Pierre, Miquelon, showing that she had cleared that port on May 19th, that her cargo consisted of a lot of merchandise and sea stores, and that' her destination was the high seas. The officers found upon search that her cargo, subsequently appraised by the customs appraisers at $39>725, consisted of 1,103 bags of whisky and 8 bottles of miscellaneous liquors. The master stated that his instructions were that a vessel would come out and meet him at Paramore Bank and receive from him the cargo of liquor, and that, failing to make contact there, he was to draw off shore about sixty-five miles and wait until he should succeed in making contact with the vessel. The seizure took place six and one-half miles off shore, and the seized vessel was brought into the port of Norfolk where the Collector of Customs assessed against her master penalties of $500 for failure to produce a manifest and $39,725 for having on board un-' manifested cargo.

The District Judge found that the Metmuzel was bound to the United States and was within four leagues of the shore at the time of the seizure; that her master failed to produce a manifest on demand and that the cargo was not manifested; that the cargo had a value of $39,725 and was consigned to the master; and that the vessel had arrived from! a foreign port or place within the limits of the Fourteenth collection district of the United States and had attempted to depart therefrom without making a report or entry, there being no stress of weather or other necessity for such departure. He held that the vessel was liable for the penalties assessed, decreed that vessel and cargo be forfeited to the United States, and directed that the vessel be delivered to the Coast Guard for use in the enforcement of the customs laws, as provided by the Act of March 3,1925 (43 Stat. 1116).

Under the principles decided by us in Gillam v. United States (C. C. A. 4th) 27 F.(2d) 296, 299, there can be no question as to the propriety of the seizure of the vessel, the assessment of the penalties and their enforcement as liens against her, nor as to the forfeiture of the cargo. That case discusses fully all the questions which arise with regard to these matters, and we need not repeat what we said there. A vessel is unquestionably bound for the United States, within the meaning of section 584 of the Tariff Act 1922, where she intends to discharge her cargo within the territorial waters of the United States. The Mistinguette (C. C. A. 2d) 27 F.(2d) 738; U. S. v. 63 Kegs of Malt (C. C. A. 2d) 27 F.(2d) 741; The Newton Bay (C. C. A. 2d) 36 F.(2d) 729. And she is to be deemed bound for the United States, within ■ the meaning of the section, if her cargo is destined for delivery to smugglers in this country, even though it is to be transferred to another vessel beyond the twelve mile limit. The Marion Phillis (C. C. A. 2d) 36 F.(2d) 688. The clearance certificate produced by the master was clearly not a manifest of cargo within the. meaning of. the statute. U. S. v. Sischo, 262 U. S. 165, 167, 43 S. Ct. 511, 67 L. Ed. 925; The Squanto (C. C. A. 2d) 13 F.(2d) 548; U. S. v. 63 Kegs of Malt, supra; The Newton Bay, supra. As the vessel was bound for the United States and had entered the twelve-mile limit of the revenue statutes with an unmanifested cargo and failed to produce a manifest on demand, she was liable for the penalties prescribed by section 584 of the Tariff Act 1922 and to seizure under section 581 (19 USCA § 481) for having incurred such penalties.

Complaint is made as to the amount of the penalty assessed on account of the unmanifested cargo; but, in addition to the presumption of correctness attaching to the appraisal, there was convincing evidence that same was correct and nothing to the contrary.

The principal point raised by the appeal is that the forfeiture of the vessel under section 585 -of the Tariff Act (19 USCA § 487) was not justified, the argument being that she never arrived within a collection district of the United States and was, therefore, not subject to forfeiture under that section. The statute in question is as follows: “Departure of vessel or unlading of merchandise before making report or entry; penalty. If any vessel or vehicle from a foreign port or place arrives within the limits of any collection district and departs or attempts to depart, except from stress of weather or other necessity, without making a report or entry under the provisions of this chapter, or if any merchandise is unladen therefrom before sueh report or entry, the master of sueh vessel shall be liable to a penalty of $5,000, and the person in charge of such vehicle shall be liable to a penalty of $500, and any sueh vessel or vehicle shall be subject to forfeiture, and any customs or Coast Guard officer may cause sueh vessel or vehicle to be arrested andi brought back to the most convenient port of the United States.”

The question here is whether the Metmuzel had arrived within the limits of a collection district at the time she was hailed by the Coast Guard; for it is unquestioned that she attempted to depart without making a report or entry as required by the statute. The question may be still further narrowed to an inquiry as to whether the place where she was hailed off Paramore Bank and within about six miles of the shore was within a collection district; for, as she had come there with the intention of transferring her cargo for delivery in the United States, she had i “arrived” within the meaning of the statute. Harrison v. Vose, 9 How. 372, 380, 13 L. Ed. 179; The Cherie (D. C.) 9 F.(2d) 640; Id. (C. C. A. 1st) 13 F.(2d) 992.

The executive order defining the Fourteenth or Virginia collection district is as follows: “(14) The District of Virginia to include all of the State of Virginia, except the county of Alexandria, with District headquarters at Norfolk, in which Norfolk and Newport News, Richmond, Petersburg, Cape Charles City, Chineoteaque and Readville shall be ports of entry. The Port of Norfolk shall include both of said cities and the war ters and shores of Hampton Roads.”

Appellant contends that the collection district thus defined is limited to the” territorial boundaries of the United States, which extend only to the three-mile limit at sea. We think, however, that this ignores the jurisdiction asserted under the revenue statutes to the twelve-mile limit, and that the collection district as contemplated by the statute in question extends to that limit. Neither the statute nor the executive order attempts to define the limits at sea of the collection district; and, in the absence of sueh definition, it seems clear that the district must be held to embrace the territory within which the customs officials are given jurisdiction and required to perform their duties. How far does this territory extend ?

Section 581 of the Tariff Act 1922 (19 USCA § 481) authorizes officers of the Customs or of the Coast Guard to board any vessel within four leagues of the coast of the United States “without as well as within their respective districts,” to examine its manifest and to inspect, search or examine the vessel itself. It will be noted that the language quoted expressly recognizes the four league limit as being within the collection district. Section 586 (19 USCA § 488) provides for penalties against the master and for seizure and forfeiture of vessel and merchandise for permitting merchandise to be unladen from the vessel without a permit, where it has arrived within four leagues of the coast of the United States. And it will be noted that this statute recognizes practically the same exception as is recognized by the statute providing forfeiture for departure without entry after arriving in a collection district, viz., “accident, stress of weather, or other necessity.” When we construe these sections together, as we must do, since they are parts of the same act, it is clear that, for preventing frauds on the revenue, customs officials are authorized to exercise jurisdiction over the ocean embraced within the twelve-mile limit and that such territory must, therefore, be deemed within their respective collection districts within the meaning of the statute.

There can be no question as to the validity of statutes authorizing customs officials to exercise their jurisdiction to the twelve mile limit and thus making the zone within such limit a part of the collection districts within which they are to operate. As we said in Gillam v. United States, supra: “Sueh provisions have been a part of every tariff act passed by Congress beginning with the statute of 1790 (1 Stat. 145) which introduced the 4-league limit (section 31) of the British hovering statutes. While in effect an assertion of extraterritorial jurisdiction, they are justified on the ground that they are necessary to territorial security and the proper enforcement of the laws of the country. Church v. Hubbart, 2 Cranch, 187, 235, 236, 2 L. Ed. 249; The Apollon, 9 Wheat. 362, 371, 6 L. Ed. 111; Manchester v. Mass., 139 U. S. 240, 258, 11 S. Ct. 559, 35 L. Ed. 159; The Cherie (C. C. A. 1st) 13 F.(2d) 992; Arch v. U. S. [(C. C. A.) 13 F.(2d) 382], supra; Dickinson on Jurisdiction at the Maritime Frontier, supra.”

It is argued that a vessel which has not been within the jurisdiction of the United States cannot be guilty of a crime or incur a forfeiture under the laws of the United States. This begs the question. For the purpose of enforcing the revenue laws, the United States asserts jurisdiction to the twelve-mile limit; and a vessel bound for the United States which comes within that limit is within the jurisdiction asserted and maintained for the enforcement of those laws, and is subject to the penalties which they prescribe. If a ship bound for the United States may be required to produce a manifest of its cargo as soon as it comes within the twelve-mile limit or may be forfeited for transferring cargo within such limit without a permit, there is no reason why forfeiture should not be enforced against a vessel bound for the United States which departs without making an entry as the statute requires.

In Arch v. U. S. (C. C. A. 5th) 13 F.(2d) 382, 384, the Circuit Court of Appeals of the Fifth Circuit dealt with a ease in which a rum-laden vessel anchored outside the three mile but within the twelve-mile limit. In affirming a decree imposing penalties under section 581 of the Tariff Act 1922, the -court laid down what we think was the correct rule, and one which we think equally applicable to a forfeiture under section 585. Said the court,' speaking through Judge Foster: “Conceding that the criminal laws of the United States such as the National Prohibition Act are not effective more than three miles from the shore, nevertheless, from the earliest times, the United States has claimed and exercised jurisdiction over the marginal sea to at least four leagues for the purpose of enforcing her revenue and customs laws. Jurisdiction was so assumed by the Act of March 2, 1799 (1 Stat. 646, § 25), and continued to the present day by the various tariff and customs administrative acts. Great Britain also claimed the same extent of territory by the Hovering Act of 1736, 9 George 2d, C. A. P. 35, and doubtless, every maritime nation claims the same right. The Supreme Court has recognized the right of a nation to enforce her customs and navigation laws on the high seas beyond the three-mile limit. Church v. Hubbart, 2 Cranch, 187, 2 L. Ed. 249. And we have so held in United States v. Bengochea, 279 F. 537, a ease in all its essential features similar to this one. It is evident that the Island Home was loaded with a cargo intended to be introduced into the United States by those on board. This could be done by the use of small boats after arriving within a convenient distance from the coast as well as by sailing into a harbor and there unloading on lighters or at a wharf. When she reached a point within four leagues of the shore she was as much within the jurisdiction of the United States as if actually in port, and was required to observe all the customs laws and regulations.”

The eases upon which appellant relies are not in point. In the Apollon, 9 Wheat. 362, 6 L. Ed. 111, the vessel sought to be forfeited had merely sailed up the St. Mary’s river, which formed the boundary between the territory of the United States and Spain, and anchored in Spanish waters. She did not enter the river for the purpose of going into an American port, and did not anchor in the river except upon the Spanish side. The 'court held that there was no arrival within American territory requiring report and entry, but a mere transit to a point in Spanish territory through waters over which Spain had equal authority with the United States. In The Javirena (C. C. A. 5th) 67 F. 152, while the vessel anchored within 'twelve miles of the coast, she did so for the purpose of repairing a disabled mast, and not for the purpose of trade or business. She was not bound for any port of the United States, and there was nothing to show that she was engaged in violation of the revenue laws. It was held that she was not required to make entry; and, while the holding is manifestly correct, it can have no application to the case at bar, where the vessel in question was bound for the United States for the purpose of violating its revenue laws. In The Over the Top (D. C.) 5 F.(2d) 838, the acts complained of occurred nineteen miles at sea, and the court intimated that, had they occurred within the twelve-mile limit, the libels might have been sustained. Burns v. U. S. (C. C. A. 5th) 296 F. 468, was a prosecution for conspiracy to violate the National Prohibition Act; and the holding was that the mere fact that a vessel passed at a certain place within the three-mile limit did not authorize officers to board her where there was no showing that she was bound for a port or place within the United States. It has no bearing upon the question as to whether a vessel bound for the United States must make entry after passing within the twelve-mile limit before departing from the collection district.

For the reasons stated, we think that the deeree below was correct, and same will accordingly be affirmed.

Affirmed.


author: ERVIN, District Judge.

text:
    THE DEAUVILLE.
    District Court, S. D. Alabama.
    April 29, 1931.
    Alex C. Birch, Ú. S. Dist. Atty., and J. E. Meredith and D. R. Coley, Jr., Asst. U. S. Attys., all of Mobile, Ala.
    Armbreeht, Hand & Twitty, of Mobile, Ala., for the schooner.
   ERVIN, District Judge.

This is a libel filed against the British schooner, Deauville, charging violations of the Tariff Act.

In this ease the Coast Guard cutter, Dallas, left the whistle buoy, St. Joseph Point, on the Florida coast, and ran a straight course for some sixteen miles. She observed the Deauville at anchor dead ahead when she was about three miles from the Deauville and continued on until she got near the Deauville when the Deauville weighed anchor and started up in a southerly direction. The Dallas then changed her course so as to intercept the Deauville and, shortly thereafter, inter- . cepted and boarded her. She found the Deauville to be loaded with liquor in eases and no other cargo. She placed the master of the Deauville under arrest and took the Deauville in tow and brought her into ■ the port of Mobile, where this libel was filed under sections 581, 583, 584, 585 of the Tariff Act (19 USCA §§ 481, 485-487), which, charges unlading a part of the cargo, failure to deliver a manifest on demand, and leaving the collection district without reporting. It is undoubtedly true that the Deauville had unloaded a part of her liquor cargo after she started from Nassau, and there is much suspicion that this portion of the cargo was brought into the state of Florida. There is no direct proof on this subject, nor is there any sufficient evidence to convict the Deauville on this charge, and I therefore dismiss it.

Primarily, the whole case depends on the question of whether or not the Deauville had come within the twelve-mile limit of the Florida coast for the purpose of delivering liquor. The facts show that she cleared from Nassau for Anguilla Keyes with a cargo of liquor. There seem to be three places on the charts referred to as Anguilla Cayes or “Keyes,” one to the east of Nassau and two to the west, but none of them being more than sand keyes having no port. The master of the boat testified that he, was agent of the liquor and had intended to deliver it at Anguilla Keyes to a green vessel which was to meet him there; that if the vessel didn’t meet him there he was to go to another spot and from there to another spot, and if he didn’t meet her there he was to go to Honduras.

The boat was found many miles north of any destined place he had been told to go to. He testified that he was blown out of his course by storm, his engine had gotten out of fix, and that he arrived where he had anchored some time during the night of December 26th, and his vessel was arrested the following day. He made a statement after his arrest which was taken down by a stenographer, in which statement he testifies: “The engine ain’t running good and I got in sand and anchored about midnight Friday night and remained until next morning until the Engineer began to work on the engine for satisfaction and at three o’clock, the Engineer was still in the engine room getting the engine ready, and he told me that he would soon be ready. I said to him, ‘all right.’ Shortly after that, I looked around and saw an object keep coming in my direction. I said to the Engineer, ‘Let’s get under way, let’s get going.’ I told the Engineer to start his engine if he is ready. After a few minutes he started his engine . and the engine stalled, but he kept on with it until he w^s able to get it in better condition, and in fifteen minutes after we started, the Coast Guard came along side and passed right by us and turned back and came back along side and I stopped. .The Captain made a reply to me, ‘Get ready, I am going to tow you in.’ I made a reply to him that I was 18 miles from the nearest point of land and he made a reply to me that I am 11%. I didn’t say anything else and one of the officers came aboard.”

When examined as a witness in this case, he denied making the statement, “I got in sand.”

On cross-examination as to the stenographic characters representing sand, a question was raised as to whether or not the master said, when he got in the “sand,” or whether he got “soundings”; but Mr. Coley, who was present when the statement was made, testified that he said “sand” and not “soundings.”

It was argued that by his statement that when he got in the sand, he meant that he got in the sand so his anchor would hold, instead of meaning that he struck bottom. If this were so, why should the master deny making the statement? Again the master testified that he reached the spot at which he anchored, on the night of the 26th of December.

When the vessel was seized on the 27th, the customs officers took charge of certain books and papers found on the vessel in the master’s cabin. Among these papers was a book of blank paper, in which one of the leaves had been torn in two, but the tom sheet was found in the boob. An examination of this sheet showed imprinting where the previous sheet had been written on in pencil which bore rather heavily on the sheet, so leaving the imprint of the pencil mark on the second sheet. The government submitted this second sheet to a finger print expert, who treated it with certain powders and in this way brought out figures showing a calculation as to the location of the vessel, giving practically the same latitude and longitude, and dated some four or five days before the master testified that he had arrived at this locality, thus showing that he had, in fact, been there four or five days longer than he had testified to. The master testified on examination that he made his observations and calculations so as to calculate the longitude and latitude daily; that he destroyed them as he had no use for them. In addition to this, the testimony on the stand by Lieutenant Edwin L. Whitfield shows that using the American Nautical. Almanac found on board the Deauville, and taking the declination of the sun as shown by these calculations, they were made on December 21, 22, and 23. It was further shown that in the hold of the vessel where the liquor was stored right under the hatch there was a space in the cases of liquor indicating that a number of cases might have been taken out of the hatch, also his liquor cargo was short 16 cases.

The spot at which the Deauville was anchored was approximately opposite St. Andrews Bay on the Florida coast and easily accessible to small boats from this coast. The location of the spot at which the Deauville was anchored was arrived at by taking the course from the whistle buoy and the distance logged by the Dallas, and not by any observations, and the testimony showed that according to this course and distance run by the Dallas, the Deauville was inside the twelve-mile limit when anchored; while Archer, the master of the Deauville, testified that he was considerably outside the twelve-mile limit. The testimony showed that there was one sounding made by the Dallas at the time the Deauville was overhauled which showed 18 fathoms. Archer testified that he made a sounding too^ and found 16 fathoms, and it was urged that the chart shows that this depth could not be found anywhere on this Florida coast near where the Deauville was anchored, within twelve miles of the shore. An examination of the chart shows that the soundings found thereon are at considerable distances and taking the surface under the sea as being the same as the surface of the land above the tidewater, I see no impossibility nor even improbability of there being spots at which a greater depth may be found than are ordinarily shown on the chart. Remembering also that when the Deauville saw the Dallas approaching, she was anchored and immediately hoisted her anchor and started in a southerly direction, which would take her further from the shore, I can see no reason why the Deauville should have done this had her Master not realized that she was in the twelve-mile limit. His whole, testimony shows that he knew that his vessel would be in trouble if found within the twelve-mile limit.

Why should he have weighed anchor and ran further out if he was then outside the twelve-mile limit; why should he be found several hundred miles up the west coast of Florida and off his route, and in close proximity to the coast, and with 16 cases missing from his cargo, unless he went there for the purpose of delivering his cargo there?

Why should he state he had arrived at the point where he was anchored on the night of the 26th of December, when in fact he had been there for five or six days, and in a location where small boats could come out and get portions of his liquor cargo, unless he went there for that purpose?

Why should he state he ran into sand and later deny making the statement if he meant by it he ran into sand where he could anchor, besides, any one familiar with that subject knows that an anchor will drag in sand but sink into mud and hold.

Under all the circumstances, I conclude that the Deauville was hound to a place in the United States and was anchored within twelve miles of the Florida coast.

The Coast Guard demanded the manifest of the master of the Deauville, either at the time of seizure or on the way to Mobile, and it was not delivered. The master explained, as his reason for not delivering it, that he had kept it in a locker under his berth in his cabin, and the storm filled this locker with water which dissolved the manifest, but it was not washed overboard. He says he did have a manifest and had signed it. He did deliver to the Coast Guard a typewritten list of the liquor on board. This list‘was no manifest and was not signed by him. The testimony shows that several other papers were found in the locker as well as some supplies, and these papers were not dissolved.

The list of liquors, the ship’s Transire, and her British Registry, and other papers were all .produced and show no water damage. He says he kept these in his hand bag.

If he had a manifest, why was it separated from the other ship’s papers, and hidden, and why was it dissolved when other papers, not as strong and well made as the paper it probably was made of, were not so dissolved ?

Remembering that his clearance from Nassau was not to a port, but only to a spot on the sea, and that according to his own testimony he was to transship his cargo at sea, I can easily conclude that he never had a manifest but only the typewritten list of the liquor he had on board.

Then was he bound to a port or place in the United States?

Again remembering that his only cargo ' was liquor, that his clearance was to a spot in the sea, and he was found several hundred miles north of this spot and out of the way, and in close proximity to the Florida shore where he had no business to be, and evidently had been there or thereabouts four or five days when he says he got there the night before his seizure, and also that his cargo of liquor is 16 eases less than he started with, the conclusion is irresistible that he was bound for the place where he was found, a place in the'United States.

Did the Deauville, a foreign vessel from a foreign port, arrive within the limits of a collection district of this country and depart or attempt to depart, except from stress of weather or other necessity, without making a report or entry as required?

I have already found that she was anchored within twelve miles off the Florida coast line laden with liquor and having no manifest.

When the Dallas was observed approaching, she weighed anchor and headed out to' sea, and when overhauled, claimed to be eighteen miles off shore.

Gould any one find from these facts an intent or purpose to make a report or entry in the collection district in which she was found?

It is urged that being over three miles from shore, and nearly twelve miles, she was not within a collection district.

This contention is met by Miller v. United States, 49 F.(2d) 368, Fourth Circuit, decided April 13, 1931.

The Deauville having no manifest, so not delivering any on demand, and the liquors on board being consigned to the master according to his testimony, and having been appraised by the customs officers of Mobile of the district at $15,854, and there being no testimony to the contrary, á decree will be entered in accordance with this opinion declaring the penalties and forfeiting the vessel.