text:
    UNITED STATES v. SOUTHERN LUMBER CO.
    No. 9007.
    Circuit Court of Appeals, Eighth Circuit.
    Aug. 11, 1931
    G. T. Sullins, Asst. U. S. Atty., of Ft. Smith, Ark., and M. W. Goldsworthy, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (W. N. Ivie, U. S. Atty., of Ft. Smith, Ark., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Lester L. Gibson, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief), for the United States.
    H. T. Harrison, of Little Rock, Ark. (Edward L. Wright, of Little Rock, Ark., on the brief), for appellee.
    Before KENYON and BOOTH, Circuit Judges, and OTIS, District Judge.
   KENYON, Circuit Judge.

This suit was brought to recover a portion of the income tax assessed against ap-pellee, a corporation, for the years 1918 and 1919, together with interest thereon.

Parties will be designated as in the trial court.

The undisputed facts are as follows: Plaintiff filed its return as to the 1918 tax on June 12, 1919, showing a total tax due of $122,423.41, which was duly assessed by the Commissioner of Internal Revenue (hereinafter termed Commissioner) on September 24, 1919. On September 30, 1919, plaintiff filed claim for the abatement of $90,406.79 of the tax shown due on its return. The tax was finally determined by the Commissioner on February 3, 1926. Additional protests were filed by the taxpayer on April 25, 1926, and final conference was held on July 2, 1926. The unpaid balance of $82,423.49, principal, was paid October 19,1926. Interest on the amount in the sum of $34,119.01 was paid November 30, 1926. The claim for abatement was rejected November 16, 1926. As to this tax three waiver agreements were entered into between the Commissioner and the taxpayer. The first dated January 23, 1924, extended the period for determination, assessment, and collection of the tax for the year involved to June 12, 1925. The second waiver dated January 8, 1925, extended the period for making any assessment of income or excess profit tax under any return for the year 1918 to December 31, 1925. The third waiver dated December 17,1925, extended the period for making any assessment of income or excess profit tax under any return for the year 1918 to December 31, 1926. October 6, 1928, claim for refund of $82,423.49 was filed. May 25, 1929, claim for refund of interest in the sum of $34,119.91 was filed. Both claims were rejected in July, 1929. The proceedings relative to the 1919 tax were similar except as to dates. The return for 1919 was filed March 15, 1920, showing a tax due of $89,-688.63, which was duly assessed by the Commissioner on May 29, 1920. March 17, 1920, plaintiff filed with the Commissioner a claim for the abatement of $55,880.70 of the tax shown due on its return. The tax was ultimately determined on February 3,1926. Additional protests were filed by the taxpayer on April 25, 1926, and final conference was held on July 2, 1926. The claim of the taxpayer was allowed on November 12,1926, for $16,216.67, and rejected for $39,669.07. This sum was paid to the collector on October 19, 1926. Interest on the tax assessed in the sum of $14,801.45 was paid on November 30, 1926. Two waivers with relation to this matter were entered into by the taxpayer and the Commissioner. One dated January 8, 1925, extended the period for making any assessment of income or excess profit tax for the year 1919 to December 31, 1925. The second waiver was dated December 19, 1925, which extended the period for making any assessment of income or excess profit tax for the year 1919 to December 31, 1926. Claim for refund was filed October 6, 1928, for $39,-669.07, the amount rejected in claim for abatement. This refund claim was rejected in November, 1928. A supplemental refund claim was also rejected.

The case was tried by the court without a jury. Motion for judgment made on behalf of. defendant was overruled, the findings of fact and the conclusions of law requested by defendant were refused, and judgment was entered against defendant for the sum of $171,013.02 with interest.

The trial court held that the waivers were executed by reason of threat of distraint and after all rights of the government to collect the tax had expired by virtue of the statute of limitations, and therefore payments of the taxes could be recovered from the government; that section 611 of the Revenue Act of May 29, 1928 (26 USCA § 2611), was not applicable as it was enacted after liability for the taxes had been extinguished.

Plaintiff contends that the waivers given do not extend the time for collection, the assessment not being made within the extended period; that section 6Í1 of the Revenue Act of 1928 does not apply, and that collection was not stayed thereby; that the action is brought under section 3220 of the Revised Statutes (26 USCA § 149) for an erroneous or illegally assessed tax and not as one for an overpayment under section 607 of the Revenue Act of 1928 (26 USCA § 2607). It concedes that the government had a right to collect under an assessment made pursuant to an assessment waiver, but that such is not this ease. It is the position of defendant that the collection of the taxes in question was made within the statutory period for collection because of the extensions granted by the waivers; further that the filing of the claim for abatement operated under section 611 of the Revenue Act of 1928 as a stay, and therefore the payments could not be considered as overpayments under the provisions of section 607 of said act relative to payments made after the expiration of the period of limitation properly applicable thereto.

A number of statutes are involved, which we group in the footnotes for convenient reference.

The consideration of this ease falls into the divisions: (a) The effect of the waivers upon the applicable statute of limitations, (b) the effect of section 611 of the Revenue Act of 1928. It is unnecessary to consume space by setting out all of these waivers. The two relating to the 1919 tax are practically the same as the second and third relating to the 1918 tax, the difference being as to the years. We will set out therefore only the waivers with relation to the 1918 tax. The first, entered into January 23,1924, is as follows:

“January 23, 1924.
“Income and'Profits Tax Waiver.
“In pursuance of the provisions of subdivision (d) of section 250 of the Revenue Act of 1921, Southern Lumber Company, of Warren, Arkansas, and the Commissioner of Internal- Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of the said Southern Lumber Company for the years 1917 and 1918 under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act entitled An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes, approved August 3, 1909. This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for a period of one year after expiration of the statutory period of limitation, or the statutory period of limitation as extended by any waivers already on file with the Bureau, within which assessments of taxes may be made for the year or years mentioned. •
“[Signed] Southern Lumber Company,
Taxpayer,
“By Fred Wyman, President.
“D. H. Blair (SA) Commissioner.”

It is to be noted that this waiver consents to a later “determination, assessment and collection” of the amount of the tax. Little objection is found by plaintiff to this waiver.

The second waiver, dated January 8,1925, is as follows:

“January 8, 1925.
“Income and Profits Tax Waiver.
“(For taxable'years ended prior to March 1, 1921.)
“In pursuance of the provisions of existing Internal Revenue Laws Southern Lumber Company, a taxpayer of Warren, Arkansas, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the year 1918 under existing revenue acts, or under prior revenue acts. This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1925, and shall then expire except that if a notice of a deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the date of mailing of said notice of deficiency and'the date of final decision by said Board.
“Southern Lumber Company, Taxpayer,
“By Fred Wyman, President.
“D. H. Blair, Commissioner.”
This extends time for making assessment, etc. — does not use the words “determination” and “collection.”

The third waiver, dated December 17th, 1925, is as follows:

“December 17th, 1925.
“In pursuance of the provisions of existing Internal Revenue Laws Southern Lumber Company, a taxpayer of Warren, Arkansas, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the year 1918, under existing revenue acts, or under prior revenue acts.
“This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1926, and shall then expire except that if a notice of deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the mailing of said notice of deficiency and the date of final decision by said Board.
“Southern Lumber Company, Taxpayer,
“By Fred Wyman, President.
“D. H. Blair, Commissioner.”

This waiver also uses only the term “assessment.”

These waivers constitute an unbroken continuation of time. If the waivers accomplish what defendant claims, then the period of limitation under section 250 (d) of the Revenue Act of 1921, supra, which was for five years' unless the Commissioner and the taxpayer consented in writing to the later “determination, assessment and collection,” carried the period of limitation beyond the date of payment of both the 1918 and the 1919 taxes. Prior to the Revenue Act of 1921 there had been no statute of limitations against the government as to its collection of tax moneys. The 1913 Revenue Act (38 Stat. 169) contained a three-year limitation as to assessment alone. Somewhat similar provisions to section 250 (d) of the 1921 Act ran through the Revenue Acts of 1924 and 1926 (43 Stat. 253; 44 Stat. 9). It is'reasonably clear that the limitation on collection as to the assessments here would be governed by provisions of section 250 (d) of the 1921 Act, and the limitation would commence to run from the date the returns were filed. The provision of 278 (d) of the 1924 Revenue Act that the period of limitation on collection is to run from the date of assessment is excluded by section 278 (e) from application to assessments made prior to June 2, 1924, and as to such the limitation continues to run from the date the return was filed. Russell et al. v. United States, 278 U. S. 181, 49 S. Ct. 121, 73.L. Ed. 255.

(3-5] The importance of "the waivers as to this branch of the government’s defense is evident. Without them the time limitation of section 250 (d) for collection would have passed prior to payment. It is probable that had there been no waivers 'the government would have collected its taxes without any question arising as to the statute of limitations. Waivers are of quite general use in the adjustment of federal taxes. They need not be given prior to the expiration of the statutory period of limitation or such period as extended by valid waivers, hut at any time with the effect of reviving liability. W. P. Brown & Sons Lumber Co. v. Commissioner of Internal Revenue (C. C. A.) 38 F.(2d) 425; Stange v. United States, 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed. 335; Burnet v. Chicago Ry. Equipment Co., 282 U. S. 295, 51 S. Ct. 137, 75 L. Ed. 349. Their purpose is to give a longer period for the determination of tax liability where the time under the applicable statute of limitations is insufficient. The courts have tried to carry out this purpose, and while holding that the waiver is not a contract, Florsheim Bros. Co. v. United States, 280 U. S. 453, 50 S. Ct. 215, 74 L. Ed. 542; Stange v. United States, 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed. 335, they have in construing waivers considered the intention of the parties as an important factor. The taxpayer waives the time limitation, and while the signature of the Commissioner of Internal Revenue is required only for administrative purposes, Stange v. United States, 282 U. S. 270, 51 S. Ct. 145, 147, 75 L. Ed. 335; Burnet v. Chicago Ry. Equipment Co., 282 U. S. 295, 51 S. Ct. 137, 75 L. Ed. 349, the government under the waiver gives up its present right to collect, and its intention as well as that of the taxpayer is entitled to consideration.

Does the term “assessment” as used in these waivers cover determination and collection? Do the waivers apply to assessments which were already made at the time the waiver was given?

We think the question of whether the term “assessment” in a waiver covers collection has been settled in a number of cases,, and particularly the late case of Stange v. United States, supra. The faets are not precisely the same -as here but the question there arose as here under section 250 (d) of the Revenue Act of 1921. The waiver there covered in its terms “all statutory limitations as to the time within which assessments based upon such liability may be entered.” It was contended that Congress in respect of waiver had prescribed in section 250 (d), supra, a mandatory procedure, and that time for action would be deferred only if the taxpayer waived “determination, assessment, and collection,” and that nothing was accomplished by consenting to an assessment without consent to collection. The court said, “We are of the opinion that the validity of a waiver under section 250 (d) was not conditioned on the precise use of the three words therein mentioned.” And further that: “The parties cannot have intended to have the amount of the tax ascertained and to leave the taxpayer free to pay it or not. They clearly contemplated the entire procedure necessary to determination and collection of the tax. This does not mean that the distinctions between assessment and collection were to he disregarded, but merely that the employment of a single term comprehended both steps.” The court pointed out that the failure to use words waiving the limitation upon collection was explained by the prevailing belief prior to the decision in Bowers v. N. Y. & Albany Co., 273 U. S. 346, 47 S. Ct. 389, 71 L. Ed. 676, that distraint was possible even if the statutory period for collection by suit had expired. On this question, see also Greylock Mills v. Commissioner of Internal Revenue (C. C. A.) 31 F.(2d) 655; Columbian Iron Works v. Brock (D. C.) 38 F.(2d) 816; Washington Coal & Coke Co. v. Heiner (D. C.) 42 F.(2d) 681; Solomon v. Heiner (D. C.) 43 F.(2d) 592; Sabin v. United States (Ct. Cl.) 44 F.(2d) 70; Roy & Titcomb v. United States (Ct. Cl.) 39 F.(2d) 753; Id., 282 U. S. 811, 51 S. Ct. 197, 75 L. Ed.-. It was clearly the intention of the parties that the statutory limitation as to five years for determination, assessment, and collection of taxes should be waived.

Does the fact that the assessments here were made prior to the waivers make the waivers inapplicable? It is insisted that the assessments were not made in pursuance of the waivers. We do not think it is important or controlling in this case that such is the fact. The assessments made prior to the waivers may not have been final. In fact as to the 1919 tax the first assessment was not final. They might have been abated later and new assessments made. A redetermination might have involved an additional assessment or a reassessment. In Magee v. United States, 282 U. S. 432, 51 S. Ct. 195, 75 L. Ed. 442, it was held that a statute prescribing the time for assessing income taxes under prior act was applicable to the assessment previously made. The court said: “We think the court was right in construing this statute as applicable to the assessment, although previously made, and hence that the tax was assessed “within the period of limitation properly applicable thereto/ as required by section 611 of the Revenue Act of 1928.” If the assessments were final, there is no reason why effective waivers thereafter could not have been made. The intent and purpose of signing any waiver was to secure an extension of time for consideration of plaintiff’s claims for abatement and for the determination of the tax liability. Plaintiff knew as well as the government that the assessment had been made. It was objecting to the amount of tax demanded and insisting on a reduction. It did not accept the assessment as final. It filed claim for abatement as to taxes for both years, raising questions concerning appreciation in value of timber lands and abnormal conditions affecting its capital, questions which required considerable investigation. Under these circumstances waivers were agreed to. The first as to the 1918 tax was in the exact wording of the statute, “determination, assessment and collection.” The others as to taxes for both years used merely the word “assessment.” What did plaintiff intend by these waivers and what must it have understood? Did it suppose it was merely waiving assessment and not determination and collection? Why waive the doing of something already done? Its intention clearly was to waive the statute of limitations, not only as to the assessments, but also as to the determination and collection of the taxes. If not, what was intended by use of the term “assessment,” in all except the first waiver as to the 1918 tax? There had been a plea of abatement filed which absorbed nearly the entire tax if allowed. There was much correspondence and numerous attempts to adjust matters. This very purpose of waiving the time of assessment was to delay time for collection of the tax assessed. There could be no collection without the assessment. Here was a controversy and both the Commissioner and the plaintiff wanted further time for a discussion and determination of the amount due as taxes, and they entered into a written consent therefor. After entering into such consent plaintiff now claims that because the waiver used the term “assessment” instead of “determination, assessment and collection,” the words of section 250 (d), Revenue Act 1921, it should be relieved from the payment of its just taxes. It claims now that the waiver was not good because made after the assessment, and that the use of the term “assessment” in the waiver is not sufficient to cover any waiver as to collection. It is purely a technical defense. ■ There is no particular divinity surrounding a defense of the statute of limitations where the government is trying to collect just taxes. We are satisfied that the term “assessment” as used in the waivers was intended by both Commissioner and taxpayer to .cover determination and collection, and under the circumstances here should be held so to do. Otherwise the entire performance as to waivers was a foolish and useless affair — an idle gesture. As said by the court in the Stange Case, supra, “It must be assumed that an effective and not a futile act was intended.”

Another question raised is that the waivers were obtained by duress. If so they are invalid. Gove v. Nichols, Collector of Internal Revenue (D. C.) 23 F.(2d) 856; Pictorial Printing Co. v. Commissioner of Internal Revenue (C. C. A.) 38 F.(2d) 563; Panther Rubber Mfg. Co. v. Commissioner of Internal Revenue (C. C. A.) 45 F.(2d) 314. A reading of the correspondence and a; contemplation of the evidence here shows rather conclusively that there was no duress. Plaintiff’s officers indicate in some of the correspondence their pleasure over the way the claims had been handled. They were laboring under no misunderstanding in signing the various waivers. There are cases which indicate the opinion of the court that threat of immediate distraint or other procedure as to collection after the statute of limitations had run might constitute duress. However a suggestion by the government that it would proceed to collect taxes, whether by distraint or by suit, which it claimed to be due and which it was its duty to collect, certainly would not constitute legal duress. The ease of Burnet v. Chicago Railway Equipment Co., 282 U. S. 295, 51 S. Ct. 137, 149, 75 L. Ed. 349, is rather determinative of this question. The court there said: “The taxpayer contends that the waiver was inoperative because secured by duress. The argument is that while the Commissioner in December, 1925, might have made a jeopardy assessment and have enforced collection, such action would have been illegal because the statutory period had then expired, and that a waiver procured by such a threat is ineffective. Whether or not the Commissioner would have been liable to the taxpayer for a collection made as the result of a jeopardy assessment in 1925, we need not determine. He clearly had the power to make such assessment and thereby compel the filing of a claim for abatement and the giving of a bond, or, if such claim and accompanying bond were not filed, to make collection and relegate respondent to an action at law. In the absence of a determination that this deficiency was barred, it was the Commissioner’s duty to proceed to insure the assessment and collection of the tax. At his suggestion, the taxpayer executed the waiver. Thereby it was enabled to have all questions concerning the alleged deficiency considered by the Board. A waiver given under such circumstances is not invalid. This contention, which seems to have been raised for the first time in this Court, is also unsound.”

Plaintiff insists that waivers subsequent to that of January 23, 1924, were given .pursuant to existing internal revenue laws, which brings into play the Revenue Act of 1924. It is true that act provides for waiver of limitation on assessment alone. Section 278 (d), 26 USCA § 1061 note, provides that the six-year limitation imposed thereby on collections shall run from the date of assessment. There would be no need therefore for a separate provision for waiver as to collection. Section 277 (b) of the 1924 act (26 USCA § 1057 note) continues the provisions of the 1921 Act as to certain taxes. In Russell v. United States, supra, as we have before pointed out, it is held that section 278 of the 1924 Act does not affect any assessments made prior to June 2, 1924. We do not perceive how the 1924 Act has any particular applicability to the case at bar.

It is also contended that under section 1106 (a) of the Revenue Act of 1926, supra, the liability for the taxes was extinguished. That section does provide that the bar of the statute of limitations shall extinguish the lia- ■ bility as well as the remedy. This subsection was repealed as of February 26, 1926, by section 612, Act May 29, 1928 (45 Stat. 875). Wyman, Partridge & Co. v. United States (Ct. Cl.) 41 F.(2d) 886, and Heiner v. Erie Coal & Coke Co. (C. C. A.) 42 F.(2d) 214, held that the taxpayer obtained a vested right under this statute, and that having become vested it could not be affected by subsequent repeal. In the Wyman, Partridge Case, supra, the Court distinguished its opinion from that in the Oak Worsted Mills Co. v. United States (Ct. Cl.) 36 F.(2d) 529, and Gotham Can Co. v. United States, 37 F.(2d) 793, 68 Ct. Cl. 749, where the tax was collected prior to the passage of the Revenue Act of 1926. These two cases, Wyman, Partridge & Co. v. United States and Heiner v. Erie Coal & Coke Co., were reversed by the Supreme Court (Mascot Oil Co. v. U. S., 282 U. S. 434, 51 S. Ct. 196, 197, 75 L. Ed. 444) in an opinion in which it affirmed Mascot Oil Co., Inc., v. United States (Ct. Cl.) 42 F.(2d) 309. Referring to the decision in these two eases and the fact that collections were made while section 1106 (a) of the Revenue Act of 1926 was in force, which is the situation in the case at bar, the court said: “That section was repealed, as of the date of its passage, by section 612 of the Revenue Act of 1928 (45 Stat. 875). It is not necessary to attempt to resolve the questions raised by the ambiguous language of this section, as we are of the opinion that, from any point of view, it does not protect the petitioners from the operation of section 611 of the Revenue Act of 1928. At the time the taxes were collected, there was no liability on the part of the petitioners, but this was also true in the case of the petitioners in Graham v. Goodcell [282 U. S. 409, 51 S. Ct. 186, 75 L. Ed. 415], supra. The Congress had constitutional authority in the circumstances set forth in section 611 of the Revenue Act of 1928 to cure the defect in administration which had resulted in the collection of the tax after the statute of limitations had run and to deny recovery to the taxpayers for the amount paid. The fact that section 1106 (a) of the Revenue Act of 1926 was in effect at the time of the collection is a distinction which does not affect the result.” We are satisfied that section 1106 (a) of the 1926 Revenue Act does not affect the result here.

We have no doubt in the light of the decisions which we have cited and from some of which we have quoted that the waivers of assessment constituted waivers of the statutory period for collection, and carried the time of limitation for suit to collect beyond the time of payment. None of the points raised against said waivers are in our judgment sound.

We pass then to the other proposition urged by the government as to why plaintiff cannot recover in this ease. Even if the government’s position here as to the written waivers was erroneous, we are satisfied that plaintiff would be precluded from recovery by section 611 of the Act of 1928, supra. Section 607 of this act provides that any tax paid after the expiration of the period of limitation properly applicable thereto shall be considered an overpayment and recoverable by the taxpayer, while section 611 provides that if a claim in abatement is filed with or without bond and the collection of any part of the tax was stayed, then the payment is not an overpayment under section 607. In Oak Worsted Mills Co. v. United States (Ct. Cl.) 36 F.(2d) 529, 534, the purpose of the enactment of section 611 is discussed, and a part of the report of the Ways and Means Committee on the Revenue Act of 1928 is set forth, which shows that due to misunderstandings as to the limitation upon collection by distraint of amounts ultimately determined to be due, payments had b.een made by taxpayers quite generally, even though the statute of limitations had run. Congress intended that such payments should not be refunded, and the report of the Ways and Means Committee states in relation to section 611: “However, it must be borne in mind that the provision authorizes the retention and collection only of amounts properly due, and merely withclra/ws the defens'e of the statute of limitations.” The decision in Oak Worsted Mills Co. v. United States, supra, was written by Judge Green, who for a long time was the efficient Chairman of the Ways and Means Committee of the House of Representatives, and whose knowledge of the general subject is most complete. The opinion is remarkably clear and strong. It held that section 611 of the Revenue Act of 1928 applied to eases where the collection is “stayed” as that word is used in ordinary conversation, “meaning to hold from proceeding, to postpone, or to keep back.” (Syllabus.) Also that the act was not unconstitutional as depriving taxpayer of vested rights, for the reason that no vested right accrued by the running of the period of limitation for collection of a valid tax. This ease was affirmed by the Supreme Court (Graham & Foster v.Goodcell, 282 U. S. 409, 51 S. Ct. 186, 75 L. Ed. 415). The Supreme Court considered this case in connection with eight others, and settled certain questions which had troubled the courts and had been the subject of much diversity of opinion relative to what the term “stay” means under the statute. Some of these cases had held that section 607 referred only to making of administrative refunds and not to suits in court. Others held the word “stay” must be a judicial stay or some action that would tie the hands of the Commissioner with respect to collection; others that section 607 and 611 were not retroactive; others that the assessment involved had been made after the expiration of the statutory period. A long line of cases, however, held section 611 retroactive and applicable to the faets presented in the particular cases. Among them may be cited Goodcell v. Graham et al. (C. C. A.) 35 F.(2d) 586; Oak Worsted Mills v. United States (Ct. Cl.) 36 F.(2d) 529; Regla Coal Co. v. Bowers (D. C.) 37 F.(2d) 373; Gotham Can Co. v. United States (Ct. Cl.) 37 F.(2d) 793; Rockland & Rockport Lime Corp. v. Ham, Collector of Internal Revenue (D. C.) 38 F.(2d) 239; North American Creamery Co. v. Willcuts (D. C.) 38 F.(2d) 483; American Glue Co. v. United States (D. C.) 42 F.(2d) 235; Boston Pressed Metal Co. V. United States (Ct. Cl.) 42 F.(2d) 312; Daniel Reeves, Inc., v. Anderson, Collector of Internal Revenue (C. C. A.) 43 F.(2d) 679; Imhoff-Berg Silk Dyeing Co. v. United States (D. C.) 43 F.(2d) 836; Jennings, etc., v. Charles W. Anderson (C. C. A.) 43 F.(2d) 683; Sterling Wholesale Grocery Co. v. United States (D. C.) 45 F.(2d) 227.

The opinion in the nine eases decided by the Supreme Court on January 26, 1931, Graham & Foster v. Goodcell, 282 U. S. 409, 51 S. Ct. 186, 75 L. Ed. 415, destroyed any force or effect of the eases taking the view that section 611 did not apply to the particular facts presented so as to preclude recovery of overpayments as provided by section 607. The exhaustive consideration of the subject in the opinion of the Supreme Court clarified a somewhat cloudy situation. The court holds: That voluntary-delay in collection of taxes where a claim in .abatement was filed constitutes a stay under section 611, that said section was applicable to suits brought and claims filed for refund before its enactment, that it applied to involuntary as well as voluntary payments by the taxpayer, that it was not a denial of due process of law, that it was not unconstitutional as arbitrary and capricious in its classification, that it was intended to be and was retroactive, and that no asserted vested rights arising from mistakes of government officials could prevent the legislative power from curing defects in administration, though it might destroy causes of action otherwise existing, that it precludes recovery of interest as well as principal. The court points out on the question of retroac-tivity that the statute is merely dealing with the period of limitation and it also states as to stay that under section 3224 of the Revised Statutes (section 154, title 26, USCA) suit to restrain the assessment or collection of taxes could not be maintained in any court and therefore the word “stay” cannot be taken to be limited to a mandatory stay, that even where the claim in abatement was rejected prior to the expiration of the period of limitation the case would not fall outside the purview of section 611. It refers to section 611 enacting a qualification of section 607 by providing that under certain circumstances the payment of the tax shall not be considered an overpayment. These circumstances are: “(a) An assessment of the tax within the time applicable thereto and before June 2, 1924, (b) the filing of a claim in abatement, (c) the stay of the collection of any part of the tax, and (d) the payment of such part of the tax before, or within one year after, the enactment of the Act of 1928.” All of these circumstances are present in the instant ease. There was an assessment before June 2, 1924. A claim in abatement was filed as to the assessment of taxes for both years. Investigation was made, conferences took place, correspondence was carried on. The government could have proceeded in the absence of waivers to collect the taxes. It did not do so. Collection was stayed. Payment of the taxes was made before the enactment of the statute of 1928. It would seem the Supreme Court has said in this opinion all there is to say on this particular subject, and that said decision fits this case perfectly.

Plaintiff claims, as it did concerning the waivers, that there could be no stay on ac- ' count of section 1106 (a) of the Revenue Act of 1926, as it wiped .out liability and 'there was nothing to be “stayed.” . This is completely answered otherwise in Mascot Oil Co., Inc., v. United States, 282 U. S. 434, 51 S. Ct. 196, 75 L. Ed. 444, which we have quoted in that part of this opinion dealing with waivers.

Plaintiff further claims that its suit is brought under section 3220, Revised Statutes (section 149, title 26, USCA), and that it is not asking a refund as an overpayment, but as an instance of erroneous and illegal collection. We think there is no force in this position, as it is doubted if plaintiff could have proceeded under section 3220 of the Revised Statutes alone, but if there were we are not satisfied that the suit was not brought to recover as for an overpayment under section 607, Revenue Act of 1928, for it may be noted that in plaintiff’s response to defendant’s answer is found the following: • “Plaintiff further alleges and says that payment after the expiration of the period of limitation constitutes an overpayment of taxes.” This would indicate that plaintiff proceeded on the theory of recovering an overpayment. The argument that there could be no stay after the operation of the statute of limitations does not fit the situation here. No such claim is made. The stay followed plaintiff’s claim in abatement.

Statutes limiting the time for action by the government in collecting its taxes are to be strictly construed in favor of the government. Dupont de Nemours & Co. v. Davis, 264 U. S. 456, 44 S. Ct. 364, 68 L. Ed. 788; W. P. Brown & Sons Lumber Co. v. Commissioner of Internal Revenue (C. C. A.) 38 F.(2d) 425; Imhoff-Berg Silk Dyeing Co. v. United States (D. C.) 43 F.(2d) 836; Bowers v. N. Y. & Albany Lighterage Co., 273 U. S. 346, 47 S. Ct. 389, 71 L. Ed. 676.

Many of the determining decisions as applicable to this ease have been rendered since the trial court entered its judgment. The law at that time was uncertain but these recent decisions of the Supreme Court have practically settled all the legal questions here involved contrary to plaintiff’s theory. The judgment of the trial court is reversed, and the case is remanded for proceedings in harmony with this opinion.

Reversed and remanded.

       Revenue Act of Nov. 23, 1921, § 250 (d), 42 Stat. 227, 264, 265:
      “Sec. 250 * * * (d) The amount of income, excess-profits, or war-profits taxes due under any return made under this Act for .the taxable year 1921 or succeeding taxable years shall be determined and assessed by the Commissioner within four years after the return was filed, and the amount of any such taxes due under any return made under this Act for prior taxable years or under prior income, excess-profits, or war-profits tax Acts, or under section 38 of the Act entitled ‘An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes,’ approved August 5, 1909, shall be determined and assessed within five years after the return was filed, unless both the Commissioner and the taxpayer consent in writing to a later determination, assessment, and collection of the tax; and no suit or proceeding for the collection of any such taxes due under this Act or under prior income, excess-profits, or war-profits tax Acts, or of any taxes due under section 38 of such Act of August 5, 1909, shall be begun, after the expiration of five years after the date when such return was filed, but this shall -not affect suits or proceedings begun at the time of the passage of this Act: * * * ”
      Revenue Act of June 2, 1924, §§ 277, 278 and 280, 43 Stat. 253, 299-301 (26 USCA § 1057 note; § 1058 et seq.; § 1064 note):
      “Sec. 277. (a) Except as provided in section 278 and in subdivision (b) of section 274 and in subdivision (b) of section 279 — ■
      “(1) Tbe amount of income, excess-profits, and war-profits taxes imposed by the Revenue Act of 1921, and by such Act as amended, for the taxable year 1921 and succeeding taxable years, and the amount of income taxes imposed by this Act, shall be assessed within four years after the return was filed, and no proceeding in court for the collection of such taxes shall be begun after the expiration of such period.
      “(2) The amount of income, excess-profits, and war-profits taxes imposed by the Act entitled ‘An act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes,’ approved August 5, 1909, the Act entitled ‘An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes,’ approved October 3, 1913, the Revenue Act of 1916, the Revenue Act of 1917, the Revenue Act of 1918, and by any such Act as amended, shall be assessed within five years after the return was filed, and no proceeding in court for the collection of such taxes shall be begun after the expiration of such period. * * * ” 26 USCA § 1057 note.
      “Sec. 278 * * * (c) Where both the Commissioner and the taxpayer have consented in writing to the assessment of the tax after the time prescribed in section 277 for its assessment the tax may be assessed at any time prior to the expiration of the period agreed upon.
      “(d) Where the assessment of the tax is made within the period prescribed in section 277 or in this section, such tax may be collected by distraint or by a proceeding in court, begun within six years after the assessment of the tax. Nothing in this Act shall be construed as preventing the beginning, without assessment, of a proceeding in court for the collection of the tax at any time before the expiration of the period within which an assessment may be made.
      “(e) This section shall not (1) authorize the assessment of a tax or the collection thereof by dis-traint or by a proceeding in court if at tbe time ’of the enactment of this Act such assessment, distraint, or proceeding was barred by the period of limitation then in existence, or (2) affect any assessment made, or distraint or proceeding in court begun, before the enactment of this Act.” 26 USCA §§ 1060, 1061 note, and 1062 note.
      Revenue Act of 1926, § 1106 (a), 44 Stat. 113 (26 USCA § 1249 note):
      “(a) The bar of the statute of limitations against the United States in respect of any internal-revenue tax shall not only operate to bar the remedy but shall extinguish the liability; but no credit or refund in respect of such tax shall be allowed unless tbe taxpayer has overpaid the tax. The bar of the statute of limitations against the taxpayer in respect of any internal-revenue tax shall not only operate to bar the remedy but shall extinguish the liability; but no collection in respect of such tax shall be made unless the taxpayer has underpaid the tax.”
      Revenue Act of May 29, 1928, §§ 607 and 611, 45 Stat. 791, 874, 875 (26 USCA §§ 2607, 2611):
      “Sec. ‘607. Any tax (or any interest, penalty, additional amount, or addition to such tax) assessed or paid (whether before or after May 29, 1928) after the expiration of the period of limitation properly applicable thereto shall be considered an overpayment and shall be credited or refunded to the taxpayer if claim therefor is filed within the period of limitation for filing such claim.”
      “Sec. 611. If any internal-revenue tax (or any interest, penalty, additional amount, or addition to such tax) was, within the period of limitation properly applicable thereto, assessed prior to June 2, 1924, and if a claim in abatement was filed, with or without bond, and if the collection of any part thereof was stayed, then the payment of such part (made before or within one year after May 29, 1928) shall not be considered as an’overpayment under the provisions of section 607, relating to payments made after the expiration of the period of limitation on assessment and collection.”


source: Caselaw Access Project

author: KENYON, Circuit Judge.

license: Public Domain

text:
    INTERSTATE POWER CO. v. THOMAS.
    No. 9033.
    Circuit Court of Appeals, Eighth Circuit.
    Aug. 11, 1931.

      Charles H. Weyl, of St. Paul, Minn. (Briggs, Weyl & Briggs, of St. Paul, Minn., on the brief), for appellant.
    A. A. Trost, of Warren, Minn., for ap-pellee.
    Before KENYON and BOOTH, Circuit Judges, and OTIS, District Judge.
   KENYON, Circuit Judge.

This is an appeal from a judgment of the District Court of the United States for the District of Minnesota in an action brought by 0. W. Thomas, appellee, against Interstate Power Company, appellant, for damages for personal injury caused by an electric shock to the said Thomas from appellant’s power line.

Parties will be designated as in the trial court.

The facts are as follows: Plaintiff was a farmer, who for twenty-four years previous to the accident had lived on a farm four miles south of Warren, Minn. Minnesota highway No. 6 passed the farm in a north and south direction, the farm being on the west side thereof. Defendant is in the” business of furnishing electric power, and maintains a main electric line along the west side of said highway No. 6, which carries a current of 22,000 volts. Defendant had an insulated wire from this to his house, which had a voltage of 110 volts. About one-half mile north of where plaintiff lived there is an intersecting east and west road to highway No. 6. On the north side of this road defendant maintained on poles three hundred feet apart an insulated electric wire carrying 2,300 volts, which served the Torgerson farm and none other. Between the Torger-son farm and highway No. 6, and about one-half mile from said highway and practically midway between the poles supporting the wire, there is a public road running in a northerly direction past the Fisher farm and continuing north about four miles until it intersects the main road easterly from the town of Warren. Plaintiff at the time of the accident .was with Fisher and one Kayes, owner of an Aultman-Taylor separator and a Rumley engine. The elevator on the separator was fourteen feet long. The lowest part one foot and seven inches from the ground. There was an iron rod coming out of the top of the separator, bolted to it with set screws. The elevator was made of wood on the outside and lined with steel or tin on the inside. The weigher on top was made of heavy tin and iron. September 23, 1927, plaintiff was moving this separator from the Edgar farm east of the Torgerson farm to the Fisher farm. .The separator, the wheels of which were of metal, was set up and was being moved with a tractor. Attached behind the separator was a tank containing the gas and water for the tractor. The tractor was used for threshing and for moving the machine, but could be detached. After going west and passing the Torgerson farm plaintiff turned to the north at the road to the Fisher farm. It was necessary to pass under the electric wire running along the north side of the east and west highway from the main line on highway No. 6 to the Torgerson farm. This north and south road running by the Fisher farm was not graded as was the east and west road which made the latter somewhat higher than the Fisher road, so that in' passing from the east and west road on to the Fisher road there was a descending grade. After plaintiff had reached .the north road with the separator and the tractor and was passing under the electric wire he looked back from his seat on the tractor and saw that the wire would catch the elevator on the separator. He stopped the tractor, went back to the separator and examined the situation. The wire was about seven inches down from the top of the elevator and was touching it. He did not back up because of the grade from the east and west road and because of the oil tank and the feeling that to back up would smash his blower. After studying the dilemma he was in he felt of one of the wheels of the separator to make sure it was not charged with electricity. He decided to try and get the wire loose from the elevator and he intended to take a ladder he had with him five or six feet in height and use it to pry the wire from the separator and over it, and then drive on. He stepped on the axle with his right foot and on top of the wheel with his left foot. When he took hold of the iron rod which came from the top of the separator to assist himself in getting on to the separator he received the shock which resulted in his injuries. He could not loosen his hands, and the next he knew he was in the hospital at Warren. There was a mark on the elevator where the wire had touched it, which gave the appearance of a burn. This was not discovered until after the accident.

At the close of the testimony defendant moved the court for ah instructed verdict upon the grounds that the evidence failed to show any actionable negligence, and that plaintiff was guilty of contributory negligence as a matter of law. The court denied the motion, the ease was submitted to the jury, which returned a verdict for plaintiff.

A motion for judgment notwithstanding the verdict was denied, and a motion for new trial was overruled.

Two propositions are urged on this appeal, both preserved by proper motion in the trial court: (1) That pbintiff did not show any actionable negligence on the part of defendant; (2) that plaintiff was guilty of contributory negligence as a matter of law.

On the issue of defendant’s negligence, the court instructed the jury as follows:

“It is the duty of a power company to use reasonable care to keep its lines at a height which will not interfere with the customary use of the highway for travel. If it fails to use care in that regard, it is negligent. If a road is used for transportation of high machinery, the company must recognize that fact and in placing its wires across such road, must place them high enough not to obstruct it. The company must also use reasonable care to prevent its wires from sagging so as to become dangerous to those travelling the highway. Reasonable care in transporting high voltage over wires means a high degree of precaution, a degree of care equal or eom-mensúrate to the risk involved. Failure of a power company to anticipate and guard against events which may reasonably be expected to happen, is negligence, but failure happening which would not have arisen except under exceptional or unusual circumstances, is not negligence. * * *
“If, from a fair preponderance of the evidence or overweight of the testimony, you find that the Power Company, in the exercise of due care, should have anticipated that this power wire would sag to a point over this road, so as to come into contact with a vehicle such as this separator was, and that this highway was one which it was reasonable to suppose would be used by such vehicles, and that the Company should, in the exercise of reasonable care, have taken precautions other than such as the evidence shows were taken to prevent .such sagging, either by putting in a pole or taking some other precaution, then you could find that the Power Company was negligent. Unless you do find that the Power Company was negligent in that regard, you will bring in a verdict in favor of the Company, and that will end this ease.”

The failure to give warning at the point where the accident happened was held by the court to be no basis for a finding of negligence, assuming that as originally constructed the line was high enough so as not to be dangerous.

Plaintiff claims that defendant was negligent in constructing and maintaining an uninsulated wire containing a voltage of 2,300 volts in such manner that it sagged until it was less than sixteen feet from the surface of a publie highway; that it should have placed its poles closer to the highway and thus have avoided the dangerous sag at the point where the road passed under the wire. Power companies are by statute given certain rights on Minnesota highways.

Section 7536, General Statutes of Minnesota, 1923, is as follows: “Use of publie roads — Restriction—Any water power, telegraph, telephone, pneumatic tube, or * * * light, heat or power company may use pub-lie roads for the purpose of constructing, using, operating, and maintaining lines, subways, canals, or conduits, for their business, but such lines shall be so located as in no way to interfere with the safety and convenience of ordinary travel along or over the same; and in the construction and maintenance of such line, subway, canal or conduit the company shall be subject to all reasonable regulations imposed by the governing body of any town, village or city in which such public road may be. Nothing herein shall be construed to grant to any person any rights for the maintenance of a telegraph, telephone, pneumatic tube, light, heat or power system within the corporate limits of any city or village until such person shall have obtained the right to maintain such system within such city or village, or for a period beyond that for which the right to operate such system is granted by such city or village.” R. L. § 2927, amended 1911, e. 57, § 1.

Power lines under the Minnesota statutes must be located in such way on the publie roads as not to interfere with the safety and convenience of ordinary travel along or over the same. No new standard of care is set up. The Minnesota law applicable is well expressed in Bunten v. Eastern Minnesota Power Co., 178 Minn. 604, 228 N. W. 332, 333, where the court said: “Those engaged in transmitting such a dangerous force as electricity, which gives no warning of its presence and is not apparent to the senses, are required to exercise a degree of care in constructing and maintaining the wires over which it is transmitted commensurate with the danger to be apprehended from contact with such wires or the eseape of electricity therefrom; but they are not insurers against accidents or injuries. * * * It has also been held negligent to fail to maintain such wires at a sufficient height above a highway to permit the unobstructed passage of structures of a height frequently moved along the ■ highway.” Joyce on Electric Law, par. 445, states the general rule as follows: “A com-' pany 'maintaining electric wires over which a high voltage of electricity is conveyed, rendering them highly dangerous to others, is under the duty of using the necessary care and prudence at places where others may have a right to go, either for work, business, or pleasure, to prevent injury.” See, also, as to degree of care required in transmitting electric fluid, Dierks Lumber & Coal Co. v. Brown (C. C. A.) 19 F.(2d) 732; Reynolds v. Iowa Southern Utilities Co. (C. C. A.) 21 F.(2d) 958.

Was the moving of the separator with an elevator fourteen feet long (which was not an unusual height) fully set up, the lowest part being one foot and seven inches from the ground, such unusual and extraordinary use of the publie highway that the defendant was under no obligation in placing its wires across such highway to anticipate such travel? While defendant under the law o£ Minnesota had the right to transmit the dangerous electric fluid along the highway, it was required to exercise a high degree of diligence to protect those who could be reasonably expected to be lawfully upon such highway. Defendant argues that the hauling of this separator fully set up was not ordinary travel on this particular highway and was not reasonably to have been expected. It is urged that the evidence shows this to be the only separator in the vieinity, and that the nearest farmer owning a separator was Gilbert Arhaug, who lived nine miles from the accident. We think this statement is not borne out by the evidence.

Mr. Thomas testified, “There are several similar separators in that locality.” He also testified that in moving the separator set up as it was he was proceeding according to the general custom, and that in that section of the country there was mostly grain farming. It would seem that in a grain country separators were to be expected on the highways, and, if it was the general custom to move them fully set up, as testified to by Thomas, then such moving would be embraced in the term “ordinary travel.” The testimony as to Gilbert Arhaug and his separator tends to sustain the proposition that there were similar separators in that locality, because the testimony is that sometimes he did not bring the separator from his farm, but hired some outfit to do that work for him. The Arhaug machine was larger than the Thomas separator. -

In Edison Electric Light & Power Co. v. Blomquist, 110 Minn. 163, 124 N. W. 969, 125 N. W. 895, 136 Am. St. Rep. 460, and in Collar v. Bingham Lake Rural Telephone Co., 132 Minn. 110, 155 N. W. 1075, L. R. A. 1916C, 1249, the Supreme Court of Minnesota held, the moving of a house along a highway did not constitute ordinary travel. Highways are not primarily constructed for the purpose of moving houses thereon; however, if houses were frequently and customarily moved along a highway, a different question would be presented. The Supreme Court of Kansas in Logan v. Empire Dist. Electric Co., 99 Kan. 381, 161 P. 659, L. R. A. 1917E, 258, held that it was a question of fact for the jury whether the defendant should not have anticipated the use of the highway in moving buildings thereon, and that evidence was admissible to show the extent to which the highway had been used for moving buildings, machinery, and other high structures. There was evidence to show common use of the highway in moving buildings such as should bring notice to the defendant that its high voltage wires were a menace to human life unless sufficient precautions were taken to elevate the wires to the extent they would not interfere with the lawful use of the highway. In the case of Shank v. Great Shoshone & Twin Falls Water Power Co. (C. C. A.) 205 F. 833, 837, plaintiff was moving a hay-stacker along the highway and came in contact with defendant’s wire which was twenty-seven feet and three inches from the ground, and the court said: “What was the duty of the defendant to the plaintiff under the circumstances disclosed by this evidence? It was clearly its duty to have used every reasonable precaution to raise and keep its high power transmission wires sufficiently high above ground for the safe passage of such structures as the plaintiff was engaged in moving at the time and at the place he was injured. Such structures were common to that locality. It was not of unusual height and its passage along the highway and over the bridge was to be expected at any time.” In Neumann v. Interstate Power Co., 179 Minn. 46, 228 N. W. 342, it was contended that defendant was not compelled to anticipate the handling of a twenty-foot iron pipe which had come in contact with one of the high voltage wires of defendant resulting in death to two workmen having hold of the pipe. It was held, however, that the question was for the jury. In Greenwood v. Eastern Oregon Power Co., 67 Or. 433, 136 P. 336, 339, plaintiff’s hay derrick came in contact with electric wires strung by the power company over a highway. The negligence charged against the company was allowing its wires to be maintained as low as they were over the highway. The court said that the evidence tends to show that derricks of the same character were common in that country, and that “it was the duty of defendant to have used care commensurate with the extremely dangerous character of the force it was engaged in transmitting in maintaining its wires at crossings as to minimize their danger to citizens lawfully using the public roads.”

It appears that at the time of the accident here in question the wire had sagged about four feet at a point where the north road turned off from the east and west road. The poles supporting the wire were twenty-five feet long, and five feet were under the ground. They were three hundred feet apart and the road was at just about the center of this distance. The day before the accident plaintiff had moved the same threshing outfit unddr tMs same wire without trouble. The difference in the sagging is accounted for by the difference in temperature. The day before when he went under the same wire at about 6 o’clock in the morning, just at daybreak, it was quite cool and rather frosty. The day of the accident the weather was hot and dry, and it was about half-past twelve when he attempted to go under the wire. The poles and wire looked the same as they always had. That a wire will contract in cold weather and expand in hot weather is a matter of which a court will take judicial notice. Lickfett v. Jorgenson et al., 179 Minn. 321, 229 N. W. 138. The effect of temperature is referred to in Gilbert et al. v. Duluth General Electric Co., 93 Minn. 99, 100 N. W. 653, 654, 106 Am. St. Rep. 430, where the court said: “It appears from the record that electric wires are ordinarily hung with a slack of 5 inches for every 100 feet, for the purpose of allowing for changes in temperature. The Weight of evidence indicates that 1 inch of slack in a wire will produce 4 inches of sag between poles 100 feet apart. These wires were strung by appellant 16 inches apart upon a single cross-arm. The evidence offered was conflicting, but tended to show the sag at the point of contact to be from two to four feet. There was sufficient sag so that the primary wire swung under and looped back over the secondary wire. It is conceded that ■the weight of the wire gradually increases the sag, and requires that such wires be shortened from time to time. A rising temperature increases the length of wire, and, conversely, cold shortens it. Eor this reason a slack of 4 or 5 inches is necessary between posts 100 feet apart.” Defendant’s experts would know better than any theorist the effect of temperature upon wires and would of necessity take that into account in stringing its wires over public highways.

Without extending the discussion further, we may say that we think that part of the charge of the court which we have heretofore set out relative to the negligence of the power company was correct.

In passing on the motion for new trial the court said: “I was of the opinion, when I tried this case, that, even in the absence of evidence that careful construction required the placing of poles close to a highway, a jury might find that, in the exercise of the high degree of care which a company transmitting high voltage electricity must exercise, it was the duty of the defendant to anticipate and prevent the sagging of the wire over the road in question by putting in an additional pole near the road. It seems to me that on that question reasonable men might differ and that it could not properly be said, as a matter of law, that there was no negligence in failing to take that precaution.” With this statement we agree.

Whether or not it was the duty of the defendant, in exercising that diligence it was required to use in preventing the sagging of its uninsulated wires over a publie highway to a point dangerous to lawful travel thereon, to have put in an additional pole close to the north and south road, or to have used other precautions, and whether or not the moving of a separator with an elevator fully set up constituted such ordinary travel upon the highway as was to be reasonably anticipated, are both questions of fact for the jury to determine.

We pass to the question of contributory negligence. Plaintiff undoubtedly had that nebulous knowledge of electricity that the average farmer has. He had made no study of the subject, nor read anything concerning it. He had some general knowledge of what voltage meant. He had an insulated wire to his own home from a pole on the highway on the main line which carried 110 volts; he knew of the cylindrical tanks or transformers on the poles which cut down the higher voltage so the electricity could pass into the various houses safely; he knew that the Torgerson house was the only one to tap the line on the east and west road, that the voltage into his own house was not dangerous, that “it bit you a little.” He thought the voltage on the wire to the Torgerson house was the same as on his wire, and that there was no danger of any shock in a wire carrying 110 volts. The wires looked alike. He did not know the wire he was passing under carried a voltage of 2,300 volts and was not insulated. He testified, “it was a thick wire, looked like a rubber insulated.” He was going down a grade and could not back up without considerable difficulty and injury to his straw blower. The fact of feeling the wheel showed some apprehension as to the situation, but he did not have understanding knowledge of, the danger incident to the manner in which he was arranging to lift the wire over the elevator.

In Stuhr v. Wright County Telephone Co., 119 Minn. 508, 138 N. W. 693, plaintiff was driving a threshing outfit on a public highway in Minnesota and the smokestack of the engine came in contact with defendant’s wires suspendedoover the highway. He went forward to investígate the situation, when the wires broke loose, throwing him down and injuring him. Damages were sought to be recovered because of the alleged negligence of defendant in maintaining its wires so low over the highway as to obstruct and endanger travel thereon. The defense was contributory negligence, the theory of defendant being that when plaintiff stopped his engine which was against the wires he went forward from a place of safety to one of danger to investigate their condition; that he fully appreciated the hazard of the situation. The court held that plaintiff was not guilty of contributory negligence as a matter of law.

In Wade v. Empire Dist. Electric Co., 98 Kan. 366, 158 P. 28, Wade was killed while engaged in moving a derrick along a highway, the same coming in contact with electric wires belonging to the defendant. The derrick was twenty feet high and about twelve feet square. The derrick was stopped before the wires were reached and Wade went up to lift the wires. He received a shock resulting in his .death. The court held that Wade was not guilty of contributory negligence as a matter of law. The jury found in answer to a special interrogatory that the deceased could have moved the derrick under the wire by lowering it and hauling it in a horizontal position, and it was contended that deceased therefore was guilty of contributory negligence as a matter of law because he failed to adopt the safe method, but the court was unwilling to hold him guilty of contributory negligence. See York v. General Utility Corp. et al., 44 N. D. 51, 176 N. W. 352; Shank v. Great Shoshone & Twin Falls Water Power Co. (C. C. A.) 205 F. 833.

Could not a reasonable man under all the circumstances take into consideration, in determining what to do, the faet that the wire looked the same as the one to his house which carried only 110 volts and was insulated and not dangerous? No rule could be laid down as to what an ordinary prudent person would do in the situation presented to plaintiff. Subsequent developments show he did the unwise thing. The trial court in passing on the motion for new trial discussed the situation as follows: “My own impression is that what Mr. Thomas did was an imprudent thing; that he took unwarranted chances; that he selected a way of extracting himself from a difficulty which involved unnecessary risk; but I did not think that what he did was so conclusively negligent as to justify me in withholding the case from the jury. Had-Mr. Thomas been dealing with a situation involving dangers and hazards with which all of us are familiar and had- he selected an obviously hazardous way out of his trouble, when there was a safe way, there would have been no doubt as to his carelessness.”

When a court assumes to say that reasonable men in exercising their fair and impartial judgment could not differ on a question of faet such as is here presented, it should be very sure of its ground. A layman’s opinion on a question of fact may be fully as reasonable as a court’s opinion. Where reasonable men may fairly.differ in their conclusions from the evidence as to a question of faet, the solution thereof is for 'the jury. As to whether plaintiff acted as a reasonably prudent man under all the cir.cumstanees is a question on which a sharp diversity of opinion might well exist. To have held here as a matter of law that plaintiff was guilty of contributory negligence would in our judgment have usurped the province of the jury, and the trial court was right in not so holding. In Cary Brothers & Hannon v. Morrison, 129 F. 177, 181, 65 L. R. A. 659, this court said: “The question of contributory negligence, like every question of negligence, is ordinarily for the jury; and it is only when.there is no substantial conflict in the evidence which conditions it, and when, from the undisputed facts, all reasonable men, in the exercise of a fair judgment, would be compelled to reach the same conclusion, that the court may lawfully withdraw it from them.” Mutual Life Ins. Co. of N. Y. v. Hatten (C. C. A.) 17 F.(2d) 889; United States Can Co. v. Ryan (C. C. A.) 39 F.(2d) 445; Skaggs Safeway Stores, Inc., v. Dunkle (C. C. A.) 49 F.(2d) 169.

We think the court did not err in submitting both the question of defendant’s negligence and plaintiff’s contributory . negligence to the jury as matters of fact for them to determine.

The judgment is affirmed.


text:
    SCHOLL MFG. CO., Inc., v. RODGERS.
    No. 9104.
    Circuit Court of Appeals, Eighth Circuit.
    Aug. 10, 1931.
    M. E. Culhane, of Minneapolis, Minn., for appellant.
    William P. O’Brien, of St. Paul, Minn., for appellee.
    Before KENYON and BOOTH, Circuit Judges, and DEWEY, District Judge.
   KENYON, Circuit Judge.

This is an appeal allowed by this court from an order of the .District Court affirming the decision of the referee in bankruptcy refusing the petition of appellant to withdraw ■ its claim filed in the bankruptcy proceeding of the Chain Store Merchandising Bureau, Ine., a corporation which was adjudicated a bankrupt on November 26,1920.

Appellee is trustee of the bankrupt estate. The Chain Store Merchandising Bureau, Inc., was a purchasing and servicing organization connected with, and buying and selling merchandise for, the Guild of .Merchant Druggists, Ine., the membership of which was composed of druggists.

Appellant claims that it shipped $2,862.-37 of merchandise to the Guild Drug Stores, Ine.; that it had nothing to do with the Chain Store Merchandising Bureau, Inc., and had no knowledge of the relationship of the Guild Drug Stares, Ine., to the Chain Store Merchandising Bureau, Inc., and never authorized the filing of any claim in the bankruptcy proceedings of the latter. Throughout the evidence the terms “Guild Drug Stores, Ine.,” and “Guild Stores, Ine.,” are used in referring to the “Guild of Merchant Druggists, Inc.,” which leads to some confusion.

After the bankruptcy of the Chain Store Merchandising Bureau, Inc., notices seem to have been mailed to the creditors by the Northwestern Jobbers Credit Bureau, of which W. C. Rodgers, the trustee in bankruptcy, was manager, with reference to the filing of proof of claims. These notices were entitled, “In Re: Chain Store Merchandising Bureau.” Pursuant to this notice the Scholl Manufacturing Company sent to the Northwestern Jobbers Credit Bureau on December 3, 1920, its claim for merchandising sold the Guild Stores, Inc., in the'sum of $1,-557. The letter accompanying the account was entitled, “Re: Guild Stores Inc., St. Paul, Minn.” The proof of claim, which also included an appointment of W. C. Rodgers and Wm. P. O’Brien as attorney for claimant with power to vote at meetings of creditors, was entitled, “In the Matter of Guild Stores, Ine. Bankrupt.” Before this claim was filed the title was changed presumably by the Northwestern Jobbers Credit Bureau to read, “In the Matter of Chain Store Merchandising Bureau Guild Stores, Ine. Bankrupt.” The trial court found that the Northwestern Jobbers Credit Bureau was the agent of appellant in so doing.

December 5, 1929,- the Northwestern Jobbers* Credit Bureau acknowledged receipt of claim as follows:

“St. Paul, Minn., Dec. 5,1929.
“Gentlemen:
“In Re Chain Stores Merchandising Bureau of St. Paul, Minn. We beg to acknowledge receipt of your daim amounting to $1557.00. This claim will be properly filed and we will endeavor to keep you advised of further developments. Thank you.
“Northwestern Jobbers Credit Bureau
“H. E. B.”

The proof of claim was duly filed in the bankruptcy proceeding on December 16, 1929.

December 23, 1929, appellant wrote as follows:

“Dec. 23, 1929.
“Northwestern Jobbers Credit Bureau,
“St. Paul, Minn.
“Gentlemen:
“There is considerable confusion here over that transaction which we have against Guild Stores.
“Your acknowledgment of our claim comes back under the heading of The Chain Stores Merchandising Bureau. As far as our records indicate, we did not know that such a firm existed because all of the correspondence which we have in our files was signed as Guild Stores and our order was written up and billed to the Guild Stores and not The Chain Stores Merchandising Bureau.
“Yours very truly,
“The Scholl Mfg. Co. Inc.
“Credit Manager.”

The trustee on June 14,1930', filed objection to the proof of appellant’s claim as follows:

“In the Matter of Chain Store Merchandising Bureau, a Corporation, Alleged Bankrupt.
In Bankruptcy.
“To Honorable John P. Galbraith, Referee" . in Bankruptcy.
“I, W. C. Rodgers, Trustee in this proceeding, do hereby object to the proof of debt filed in the herein proceedings by the Scholl Mfg. Co., 213 West Schiller Street, Chicago, Illinois, an alleged creditor for $1557.00. That said objection is made on the following grounds, i. e.
“The return of merchandise by bankrupt to this alleged creditor on or about November 12, 1929, in the amount of $1305.37, which amounted to a preference being made to this alleged creditor, as it was within the four months immediately prior to the filing of the petition.
“I respectfully request that said proof of debt be rejected and disallowed (an) no dividend declared upon same, unless the said preference is returned to the herein estate either in kind or its value in cash.
“W. C. Rodgers, Trustee.”

The alleged preference is this: In September, 1929, after the bankrupt had become involved financially, he had Mr. Mayer of the Goodrieh-Gamble Company of St. Paul write appellant and other creditors a letter captioned, “In re: Chain Store Merchandising Bureau,” which advised the taking back of their merchandise and waiting for the liquidation of the receivables. In pursuance of this, appellant took back in November, 192-9, merchandise of the value of $1,305.37,' which was shipped to it by the Chain Store Merchandising Bureau. This sum deducted from the value of the original shipment left a balance of $1,557, the amount of the claim filed.

October 4,1930, appellant filed a petition in the bankruptcy proceeding asking to be permitted to withdraw its claim, alleging that it had never authorized filing of the same in the bankruptcy proceeding of the Chain Store Merchandising Bureau, Inc. This was refused upon hearing by the referee October 20, 1930, who held that the petitioner knew at all times that it was doing business with the Chain Store Merchandising Bureau, the bankrupt, and that any mistake as to names was merely a clerical one or a confusion on the part of the petitioner as to the proper name under which it was to run its account. This ruling of the referee was sustained by the trial court.

Petitioner based its right to the withdrawal of its proof of claim on two grounds:

1. That the petitioner never authorized the filing of said proof of claim in said bankruptcy matter.

2. That even if said claim was filed by the petitioner, it had as a matter of law the right to withdraw the same.

We think the holding of the referee and the trial court that appellant had full knowledge of the fact that it was doing business with the Chain Store Merchandising Bureau, Inc., and that it intended to file proof of claim against that concern in the bankruptcy proceeding, had ample substantial evidence to sustain it. Appellant received back certain merchandise from this bureau, so it must have known with whom it was dealing. Our views accord with the following from the opinion of the trial court:

“After a careful examination of the evidence, I am of the opinion that there is substantial evidence to sustain the findings of the referee to the effect that the creditor sold the bill of goods involved to the Chain Store Merchandising Bureau and intended to file proof of claim against that concern in these proceedings.
“It appears that there was some confusion in the mind of the creditor concerning the names of these two corporations but it also appears that the creditor was fully informed at different times, both before it sold the bill of goods and immediately before it filed its proof of claim, of the distinction between the two corporations, and knew that the Guild of Merchants Druggists, Inc. was merely a membership proposition and that the Chain Store Merchandising Bureau was a servicing organization, or, in other words, the one that bought and sold merchandise.
“I think the referee was justified in considering, under all of the circumstances of the ease, that the Northwestern Jobbers Credit Bureau was the agent of the creditor and was authorized to change the heading of the proof of Claim and file it as it appears they did. It appears to have been a mistake. It was not the name of either corporation. It was the intention of the creditor to file the claim against the corporation to which it had sold the merchandise.”

We pass to the other question as to whether appellant had the right as a matter of law to withdraw its proof of claim filed in the Chain Store Merchandising Bureau, Inc., bankruptcy matter. That a claim filed in a bankruptcy proceeding may be withdrawn is the general rule. 2 Collier on Bankruptcy (13th Ed.) p. 1141; 2 Remington on Bankruptcy, § 754.

We quote from In re Strickland, 167 F. 867, 868 (District Court): “The only question before the court is the propriety of the referee’s order, allowing a creditor to withdraw his proof of debt and intervention before the final determination of the cause. Now, the right to dismiss legal proceedings has long inured to parties in all jurisdictions, state and national. Veazie v. Wadleigh, 11 Pet. 55, 61, 9 L. Ed. 630; Stevens v. The Railroads (C. C.) 4 F. 97. The only limitation upon that right is that the party di.s-. missing shall pay all costs, and that the dismissal shall not violate any substantial right, nor render it unavailable. * * * Can the withdrawal of a proof of debt be said to violate any substantial right of the bankrupt, or place him in a position more prejudicial than which he occupied before the proof was filed? An examination of the precedents shows that all of the recent cases sanction a withdrawal or amendment^ under ordinary circumstances, of proceedings in bankruptcy.” In Re Stewart, (D. C.) 178 F. 463, 468, the court, speaking of the attempted withdrawal of a claim for goods sold and delivered to bankrupt, said: “I do not think it within the power of the court, or referee, to prevent such withdrawal or abandonment of the claim presented. The withdrawal is a matter of right in the creditor, and not a matter of discretion with the referee or judge.” Deeley v. Cincinnati Art Pub. Co. (C. C. A.) 23 F.(2d) 920, 921, involved the right of a creditor who had proved a claim in a bankruptcy court to withdraw it to avoid any effect of an alleged preference. The case went off on a question of jurisdiction, but the court said: “The appeal must be dismissed for lack of jurisdiction. We have the less regret in thus disposing of the case, because we are not satisfied that the permission to withdraw was erroneously granted.” See, also, Chicago & A. R. Co. v. Union Rolling-Mill Co., 109 U. S. 702, 3 S. Ct. 594, 27 L. Ed. 1081; Harding v. Corn P. R. Co. (C. C. A.) 168 F. 658.

The exception to the general rule as to the right of dismissal is where such dismissal or withdrawal will result in legal prejudice to the other party, which would be the situation if there were a counterclaim at issue or affirmative action sought by defendant. In Ex parte Skinner & Eddy Corporation, 265 U. S. 86, 44 S. Ct. 446, 447, 68 L. Ed. 912, the court, in discussing the right of plaintiff to discontinue his suit before verdict or judgment, says: “It is ordinarily the undisputed right of a plaintiff to dismiss a bill in equity before final hearing.” Further:

“The right to dismiss, if it exists, is absolute. It does not depend on the reasons which the plaintiff offers for his action. The faet that he may not have disclosed all his reasons, or may not have given the real one, cannot affect his right.
“The usual ground for denying a complainant in equity the right to dismiss his bill without prejudice at his own costs is that the cause has proceeded so far that the defendant is in a position to .demand on the pleadings an opportunity to seek affirmative relief and he would be prejudiced by being remitted to a separate action. Having been put to the trouble of getting his eountercase properly pleaded, and ready, he may insist that the cause proceed to a decree.”.

In Gilmore v. Bort (C. C.) 134 F. 658, 660, the court in speaking of the right of complainant to dismiss a hill without prejudice says: “This rule, however, is subject to the exception that, where such dismissal would be manifestly prejudicial to the defendant, it will not be permitted. The prejudice, however, to the defendant, that will authorize the denial of the complainant’s motion to dismiss his bill, must be some plain, legal prejudice, other than a mere prospect of future litigation rendered possible by the dismissal of the bill.”

It is to be noted in the ease at bar that no affirmative relief was asked by the trustee. There was no counterclaim. The claim of appellant was objected to because goods had been returned which the trustee claimed amounted to a preference and such preference was urged as a defense to appellant’s claim. The trial court was of the opinion that the right to have an adjudication of preference made by the referee was an affirmative right and was in the nature of affirmative relief against the claim filed.

We are unable to agree with this theory. What the trustee loses by a withdrawal of the claim is the opportunity to have determined a question that might be of benefit to him in a suit brought to recover the alleged preference. Is this sufficient to bring this ease within the exception to the general rule as to the right to dismiss? In Harding v. Corn Products Refining Co. (C. C. A.) 168 F. 658, 665, the court in part said: “To authorize denial of such right to discontinue ‘there must be some plain, legal prejudice’ to the other parties, which ‘must be other than the mere prospect of future litigation.’ * * * The utmost effect of discontinuance in reference to either issue is to leave such controversy open for future litigation, between the same or other parties, which is not legal prejudice.” See, also, Gilmore v. Bort, supra.

A plenary suit in equity by the trustee would be necessary to recover the preference, and the referee would have no jurisdiction over such suit. Weidhorn v. Levy, 253 U. S. 268, 40 S. Ct. 534, 64 L. Ed. 898. The referee could have decided there was a preference and hence that the claim could not be allowed, and that holding affirmed by the District Court would of course be of value as res adjudieata in an action to recover the preference. However, granting that such adjudication is of some value, the faet remains that the trustee was asking for no affirmative relief, and was in no position to demand such relief under the objections filed to proof of the claim. The relief asked is merely the establishment of the preference as a defense to the claim, and we are satisfied that the mere depriving the trustee of the opportunity to have the question of preference passed on in this hearing is not the destruction of any substantial right, or sufficient to constitute legal prejudice and warrant the overruling of the petition of appellant to withdraw its claim. The trustee would have to go to the home state of appellant (Illinois) to recover this alleged preference if appellant had never filed its proof of claim, or if being filed the referee and the trial court had held there was a preference. The order of the District Court is reversed, and the ease is remanded with directions to the trial court and the referee to permit the withdrawal by appellant of its proof of claim.

Reversed.


author: DEWEY, District Judge.

text:
    CUTTELL v. FLUENT.
    No. 9078.
    Circuit Court of Appeals, Eighth Circuit.
    Aug. 28, 1931.

      R. W. Zastrow, of Charles City, Iowa, for appellant.
    J. C. Campbell, of Charles City, Iowa (William Butts, of Rockford, Iowa, and Campbell & Campbell, of Charles City, Iowa, on the brief), for appellee.
    Before KENYON and BOOTH, Circuit Judges, and DEWEY, District Judge.
   DEWEY, District Judge.

This is an action seeking to recover an alleged trust fund which came into the hands of the receiver of the First National Bank of Bockford, Iowa, when it was closed by the Comptroller of the Currency on the 23d day of February, 1929. On March 26, 1926, a •draft on the Minnesota Bural Credit Bureau for $13,500 payable to the administrator of the estate of Henry M. Cline, deceased, was held by said administrator. To carry out an agreement between the widow and heirs, that the widow should receive the interest on $12,-500 of this sum during her lifetime, the administrator made an application for and the district court of Iowa authorized him to deposit $13,000 in the First National Bank of Bockford, Iowa. The order by the court which was administering the estate provided, “Said fund to be treated as a special deposit and bond to be given in the sum of $13,000.-00 by said bank.” This order was shown to the president and cashier of the Bockford bank and the requisite bond was furnished. At the same time and on May 1,1926, the administrator delivered the draft for $13,500 to the bank, receiving credit for $12,500 and the balance of $1,000' in cash. The deposit was made in the savings department of the bank and the administrator was given a savings passbook showing a deposit of $12,500. The savings account was of the usual character and showed withdrawals of interest on three different occasions prior to the closing of the bank. The draft that was deposited with the First National Bank on the 1st day of May, 1926, was on this same date sent to its reserve or correspondent bank, the First National Bank of Chicago, and on the 3d day of May, 1926, the amount of the deposit was there credited to the First National Bank of Bockford, Iowa. How long the proceeds were left in the Chicago bank does not appear, except that by October 28, 1927, the account of the Bockford Bank with the Chicago bank was overdrawn. When the draft was credited to the Bockford batik on the books of the Chicago bank the Bockford bank had with the Chicago bank $26,868.50.

At the time the bank’s doors were closed it had $2,907.45 in cash which came into the hands of the receiver, and it had in cash at all times after May 1,1926, to the date when .it closed at least $2,510.65.

Notwithstanding the express limitation on the deposit that the same should be a special one, the administrator made a general deposit of $12,500 of the funds in his hands in the savings department of the bank. The deposit then was made in violation of the order of the court that it should be special and this violation was known to both the administrator and the bank.

Although in Iowa an administrator or executor may rightfully deposit money belonging to an estate in a solvent bank, yet where such a deposit as in this case is wrongful a trust may be created thereby and, the other elements existing, a preference would be acquired by the cestui que trust. Leach v. Beazley, 201 Iowa, 337, 345, 207 N. W. 374, 378. The parties do not seriously contest the trust relationship. The arguments are directed in the main on the question of augmentation and tracing of the trust funds.

The law with reference to the recovery of trust funds held in a national bank after insolvency is well settled in this circuit. The leading ease of Empire State Surety Co. v. Carroll County (C. C. A.) 194 F. 593, 604, lays down pertinent rules, as follows:

“It is indispensable to the maintenance by a cestui que trust of a claim to preferential payment by a receiver out of the proceeds of the estate of an insolvent that clear proof be made that the trust property or its proceeds went into a specific fund or into a specific identified piece of property which came to the hands of the receiver,- and then the claim can be sustained to that fund or property only and only to the extent that the trust property or its proceeds went into it. It is not sufficient to prove that the trust property or its proceeds went into the general assets of the insolvent estate and increased the amount and the value thereof which came to the hands of the receiver. * * *
“Proof that a trustee mingled trust funds with his own and made payments out of-the common fund is a sufficient identification of the remainder of that fund coming to the hands of the receiver, not exceeding the smallest amount the fund contained subsequent to the commingling, * * * as trust property, because the legal presumption is that he regarded the law and neither paid out nor invested in other property the trust fund, but kept it sacred. * * *
“But checks of third persons on the bank with which they are deposited which are paid hy crediting the bank and charging the drawers on its books fail to increase the cash in its possession and form no basis for a preferential payment to the depositor. * * *
“Moreover, the deposit of cheeks of third persons which are credited to the depositor and used by the bank to pay its debts bring no money into its fund of cash and form no foundation for preferential payment to the depositor. * * *
“Again, checks of third parties deposited with a bank credited to the depositor and collected through a clearing house lay no foundation for a preferential payment, in the absence of proof of the actual balance of cash the bank received on account of them, for they may have been and usually are used in whole or in part to discharge the debts of the bank. * * * ”

The fund into which trust funds are sought to be traced in this case is the cash that was in the bank at the time it closed its doors in the sum of $2,907.45. The question for determination is: Has the complainant traced said draft or the proceeds therefrom to and into this fund? Upon deposit with it the Rockford bank became the absolute owner of the draft and became a debtor of the administrator for part of the purchase price, namely, $12,500. Security Nat. Bank v. Old Nat. Bank (C. C. A.) 241 F. 1; In re Ruskay (C. C. A.) 5 F.(2d) 143; In re Gubelman (C. C. A.) 10 F.(2d) 926; Burton v. U. S., 196 U. S. 283, 25 S. Ct. 243, 49 L. Ed. 482; Douglas v. Federal Reserve Bank, 271 U. S. 489, 46 S. Ct. 554, 70 L. Ed. 1051. It may also be conceded that the Rockford bank at this time and later was solvent, and for this reason it may be presumed, although the evidence does not so show, that the Rockford bank at this time had a cash reserve.

The trust relationship having been established, the depositor may recover such fund or any part thereof in so far as the same can he traced in the possession of the bank either in its original form or in forms to which it has been converted, or into a general fund with which it has been commingled. It is not sufficient for a cestui que trust to prove that the trust property or its proceeds went into the general assets of the insolvent estate and increased the amount and the value thereof and that these assets came into the hands of the receiver. Although the draft belonged to the bank, it was a general asset only. No segregation of the draft or its proceeds from the general funds or assets of the bank had taken place. Here, then, the administrator to recover must show that the proceeds from the draft directly or by substitution were commingled at some time with the cash fund of the bank which came into the hands of the receiver. Mechanics & Metals Nat. Bank v. Buchanan (C. C. A.) 12 F.(2d) 891; Backus-Brooks Co. v. Northern Pac. Ry. Co. (C. C. A.) 21 F.(2d) 4. The record is barren of evidence that any proceeds of the draft, directly or by substitution, at any time were commingled with this cash fund.

A reason why the draft should not be considered as having been commingled with the cash fund of the hank is that a commingling of the funds can only be considered as such when they lose their identity and are commingled “with a mass of like goods.” Peters v. Bain, 133 U. S. 670, 690, 693, 10 S. Ct. 354, 33 L. Ed. 696; Ellerbe v. Studebaker Corp. (C. C. A.) 21 F.(2d) 993, 996. The appellee claims certain Iowa authorities support a rule that an augmentation of the general assets of an insolvent estate and a tracing thereto is sufficient, hut the questions here involved are governed by the general commercial law of the country and, while the decisions of the state court are always persuasive, instructive, and respected, they are not conclusive. Security Nat. Bank v. Old Nat. Bank, supra.

The clear proof is that the draft was sent to a reserve or a correspondent bank and may there have been converted into cash. But the tracing of the draft or its proceeds to the correspondent bank availeth nothing to claimant, as that fund was depleted and overdrawn prior to the time the bank was taken over by. the Comptroller of the Currency. The fund in the correspondent bank must be considered separate and apart from the cash fund in the forwarding bank unless commingling is clearly proven. Board of Commissioners of Crawford County v. Strawn (C. C. A.) 157 F. 49, 52, 15 L. R. A. (N. S.) 1100; First Nat. Bank of Forsyth v. Fidelity & Deposit Co. (C. C. A.) 48 F.(2d) 585, 587.

The administrator, having failed to prove that the draft or any proceeds thereof ever augmented or were commingled with the alleged cash trust fund of $2,907.45, is not entitled to a preferential payment therefrom, and the District Court will so enter its decree.

Reversed.