author: KERRIGAN, District Judge.

text:
    CHARLES NELSON CO. et al. v. PILLSBURY, Deputy Commissioner, et al. (three cases).
    Nos. 2716, 2715, 2735.
    District Court, N. D. California, S. D.
    April 9, 1931.

      John H. Black and James M. Wallace, both of San Francisco, Cal., for plaintiffs.
    George J. Hatfield, U. S. Atty., and Francis J. Perry, Asst. U. S. Atty., both of San Francisco, Cal., for defendants.
   KERRIGAN, District Judge.

The question presented by these three cases is the proper basis upon which to compute compensation due under the Longshoremen’s and Harbor Workers’ Compensation Act (33 USCA §§ 901-950) to an employee who has not worked at the same employment for substantially the whole of the year preceding his injury. The Commission has fixed 270 days worked as the measure of “substantially the whole” of the preceding year, and in each of the present cases the injured employee had worked less than 270 days in the year preceding his injury.

The statutory provisions applicable are .found in section 10 of the act (44 Stat. 1431 [33 USCA § 910]):

“Except as otherwise provided in this chapter, the average weekly wage of the injured employee at the time of the injury shall be taken as the basis upon which to compute compensation and shall be determined as follows:
“(a) If the injured employee shall have worked in the employment in which he was working at the time of the injury, whether for the same or another employer, during ■substantially the whole of the year immediately preceding his injury, his average annual .earnings shall consist of three hundred times the average daily wage or salary whiah he shall have earned in such employment during the days when so employed.
“(b) If the injured employee shall not have worked in such employment during substantially the whole of such year, his average annual earnings shall consist of three hundred times the average daily wage or salary which an employee of the same class working substantially the whole of such immediately preceding year in the same or in similar employment in the same or a neighboring place shall have earned in such employment during the days when so employed.
“(e) If either of the foregoing methods of arriving at the annual average earnings of an injured employee can not reasonably and fairly be applied, such annual earnings shall be such sum as, having regard to the previous earnings of the injured employee and of other employees of the same or most similar class, working in the same or most similar employment in the same or neighboring locality, shall reasonably represent the annual earning capacity of the injured employee in the employment in which he was working at the time of the injury. * * * ”

We are here concerned with sections 10 (b) and 10 (c).

A brief statement of the pertinent facts in the three eases, designating them by the names of the employees, will indicate the problem.

1. Lawlor. This man earned about $100 per month while working. During the year preceding his injury he lost three months’ work on account of illness. In the remaining nine months he worked less than five days a week. He was not a member of a regular gang of workmen, but went to the water front daily, looking for work. He describes himself as a “free lance” or “prospector.” The Commissioner computed his compensation" under section 10 (b), and used the average daily wage of one W. Davidson, who worked 297 days and received $2,138.95 in wages in the preceding year, as a member of a steady gang, as the basis for computing the compensation.

2. Pedersen. This man worked about 250 days, and earned about $1,600 during that period. He voluntarily reduced his earnings by laying off for about three months, apparently just because he had some money and did not feel like working. The Commissioner computed his earnings under section 10 (e), and again used the average daily wage of W. Davidson as reasoñably representing "the annual earning capacity of the injured ■employee.

3. Kugland. This man worked about 260 •days. There is no evidence of lay-off or illness. The wage statements produced show that he earned $870.37. He testified that he earned from $30 to $35 a week, and that he worked for others than the companies submitting wage statements. Some of these other alleged employers reported that they had no record of wages paid to him. Section 10 (b) was applied, and the wage of Davidson was ■again used as the basis for computation.

The use of the average daily wage of W. Davidson as the standard in each of these three cases resulted in an award of $25 per week, the maximum award, to each man.

In connection with the Lawlor ease certain ■evidence was taken concerning the conditions ■of employment among longshoremen and stevedores in San Francisco, and their earnings, which is made a part of the record in ■all these eases. From this evidence it appears that these men may be roughly classified into three groups, each comprising approximately one-third of the total number doing this type of work. The first group consists of the members of regular gangs, steadily employed, and earning from $160 to $185 per month. The second class, less regularly employed and somewhat less skilled or less well fitted for the work, earn from $125 to $150 per month. The third class, the “free lances” or “prospectors,” are far less regularly employed, partly because they are not preferred by the employers, and partly because many of them are satisfied to do just enough work for bare maintenance. They earn from $65 to $100 or a little more per month.

This evidence is relevant in considering the use by the Commissioner of the wages of W. Davidson as a basis for computing compensation, whether under section 10 (b) or 10 (e). It appears, from their own testimony, that no one of the three men with whom, we are here concerned actually earned an amount even approximately the earnings of Davidson, who clearly falls into the first group mentioned. Lawlor classifies himself as a “prospector” and fixes his average monthly earnings while working at $100 per month, or approximately at the rate of $1,200 per year. Pedersen was content with $1,600. Kugland, accepting his own highest estimate of $35 per week, earned not over $1,670 per year. The last two men would appear to belong to the second group. On the basis of their own statements none of these men would be entitled to the maximum award.

Taking these facts into consideration, together with the evidence as to general working conditions, I believe that it must be held that Davidson is not in the “same class,” as the phrase is used in section 10 (b) or “of the same or most similar class,” as the phrase is used in section 10 (e). The manifest intention in both- sections is to provide a basis for computing the wages of a man who has not worked substantially the whole of the preceding year which shall fairly represent his earning capacity. The use, as a basis for computation, of the average daily wage of a man of a group with higher earning power than that to which the injured employee belongs is not contemplated by the statute, and for this reason alone the motion to dismiss in each case should be denied.

In the ease of Pedersen, in which section 10 (c) was applied, this was the only question raised. In the eases of Lawlor and Kugland, it is also contended that section 10 (e), rather than section 10 (b), should have been used. I believe that plaintiffs are correct in this regard, for the reasons set forth by Judge Neterer in Andrew F. Mahony Co. v. Marshall (D. C.) 46 F.(2d) 539, and by Judge McNary in Luckenbach Steamship Co. v. Marshall (D. C. Or., March 16, 1931) 49 F. (2d) 625.

Accordingly the motion to dismiss is denied in each case, and the awards will be set aside, with directions to the Commissioner to make awards in accordance with this opinion in each ease.


source: Caselaw Access Project

author: BYERS, District Judge.

license: Public Domain

text:
    UNITED STATES v. LAU TAI SANG.
    No. 2530.
    District Court, E. D. New York.
    April 1, 1931.

      Howard W. Ameli, U. S. Atty., of Brooklyn, N. Y. (Albert D. Smith, Asst. U. S. Atty., of Brooklyn, N. Y. of counsel), for the United States.
    Francis E. Rivers, of New York City, for defendant.
   BYERS, District Judge.

This is an appeal from a judgment and order of deportation dated August 14, 1930, based upon proceedings conducted on May 22, 23 and 28, 1930, before a United States commissioner.

The matter has proceeded de novo in this court pursuant to order of Judge Galston, dated October 18, 1930. Testimony was taken in open court on November 26, 1930, and, upon reopening, on February 20, 1931.

The question at issue is whether the defendant is a citizen of the United States. He was taken into custody by the Immigration Service after receipt of an anonymous letter concerning defendant, on March 19, 1930, after being questioned at 163 Myrtle avenue, Brooklyn. He was there conducting a Chinese restaurant under a license issued to him by the department of health of the city of New York, permit division.

The defendant asserts that he was bom in San Francisco on October 14, 1901, of Chinese parents who returned to their native country when he was about.nine years of age, leaving him in the custody of an uncle since deceased.

That his parents are living, and that, about eight years ago, he wrote to his father to secure information containing the date and place of his birth, and the reply, which he no longer has, contained the desired data.

That, by reason of the destruction of pub-lie records in San Francisco following the earthquake and fire of 1905, he is unable to produce a birth certificate. That he was brought to New York during 1911, and has lived mostly in Brooklyn ever since, and his testimony purports to show the addresses at which he has lived, and the nature of his occupation, that is, he has worked as a dishwasher and a cook and in a pool room. He has been in the restaurant at 163 Myrtle avenue for about two years.

When arrested, he stated that there was no one in this country who could state the facts c.oneern.ing his birth in the United States; under date of April 19, 1930, and May 20, 1930, he caused to be published an advertisement which appeared in “Chinese Republic News,” apparently a newspaper of this city, giving his name and that of his father, and inquiring if any one knew him, and asking such to come forward, as he had no witnesses in the proceedings then pending against him.

One Sit Bok Ho, residing at 343 — 3rd street, Brooklyn, called upon the defendant on May 20, 1930, in answer to the advertisement, and claimed to have known the defendant’s father, and to have seen the latter many times, and to know of the defendant’s birth in San Francisco as asserted by the defendant.

Sit Bok Ho testified as a witness for the defendant at all hearings which have been held, and the importance of his narrative is obvious; if the defendant is a native of this country, he cannot be deported.

Having in mind the provisions of title 8, USCA § 284, wherein the burden of affirmative proof is laid upon the defendant, it becomes important to carefully consider the testimony of this witness in all its aspects, not only because of the importance of the ease to the defendant, but to .the end that' the law itself shall be vindicated in the fairness of its operation.

Ho is about sixty-six years of age; says he came to this country in 1891, landed at Portland, Oregon, where he remained six or seven years, then went to Stockton, California, for two years, then to Sisson, in the same State, for six years, and then to San Francisco for fifteen years until the earthquake came along. The total of these periods is twenty-nine years, which would take the witness down to 1920.

He says he went to Portland for a year or so, and then returned to San Francisco where he remained for twenty-one years. That total would bring him to 1941, some ten years hence, without reference to the year and more he has spent in Brooklyn since last' he was in San Francisco.

Having first testified that he has been in this country fifty-one years, it will be seen that this period in round figures has been accounted for, so that, if the year of his arrival (K. S. 17) can be readjusted, one discrepancy will have been accounted for.

On the occasion of the first hearing in Court, he said that his arrival in the United States took place in 1879 (K. S. 5) and that the answer to the question before the commissioner covering this subject had to do with his arrival in San Francisco. The question and answer appear in the minutes of the commissioner’s hearing (page 76) as follows:

“Q. When did you come to San Francisco ?
“A. I came here from San Francisco—
“Q. No, no; when did you arrive here?
“A. When I first came to United States in K. S. 17 (1891) or K. S. 18 (1892)
“Q. You went directly to San Francisco; is that it?
“A. When I first came to this country, I landed at Portland, Oregon.”

Defendant’s counsel asserts that this aspect of the testimony before the commissioner influenced his determination against the ■defendant, hence the necessity for the correction made at the first hearing before the court.

Ho’s main calling for the twenty or twenty-five years prior to 1929 was with the canning industry (Alaska Packing Company?) and it is quite impossible to discern from his testimony whether during most of this time he supplied Chinese and Mexican labor, as an independent contractor, or whether he was a .foreman or boss of one or more labor contingents required in the fish-canning industry in Alaska,' but perhaps the distinction is unimportant.

The fact may be taken as established that, prior to 1901, and certainly through 1911, he was engaged, among other things, in connection with the canned fish industry in and around San Francisco, and made periodical trips to Alaska. His personal dealings involved the assumption of an indebtedness of $3,000.00 which had not been paid in full when he left San Francisco in 1929, and his explanation of the facts in that connection is not satisfactory. On the other hand, sueh an experience does not prove that he did not know the defendant’s parents, or of the defendant’s alleged birth in that city.

Ho says of defendant’s father:

“I hired a lot of people who worked for me, and also his father worked there.”

He continues that the defendant was born in K. S. 27 (1901), ninth month, ninth day; that he knew of the defendant’s advent because the father (Lew Fook) did not come to work one day and said to the witness the next day: “I had a child bom yesterday.” That the witness visited the house ten days later and saw the baby, and twenty days later, when defendant was ábout one month old, “he had the head shaving feast, and he asked me to take dinner with him” — on which occasion he saw the baby with its mother.

He relates that his own daughter was bom the same year, which fixes it in his memory. He says he saw the boy frequently before the earthquake, and knows that an abscess on his forehead left a sear. The defendant has a sear on his forehead, which he says is the result of a boil.

Ho avers that he last saw the defendant’s father a year or so after the earthquake, and that the father and boy were together, and he recognized the latter because of the scar.

After the lapse of over twenty years, he called upon the defendant as has been stated, and, in their conversation concerning the defendant’s relatives, including the uncle, the defendant answered all questions properly according to the witness’ memory of the family; also the presence of the sear served to convince the witness of the defendant’s identity.

In this testimony, Ho referred to defendant’s father as having been in or near a wooden shed where fishing was done, in San Francisco Bay — “The Chinese call it Ta- Laumbaum. He is a maker of ropes.” It was here that Ho last saw the defendant’s father; the purpose of the call being to settle a personal account.

On the last hearing in court, Ho testified that he was in the shrimp business in Alamban, a suburb of San Francisco:

“Q. Did you know Lau Tai Sang’s father?
“A. Yes. I was a partner with his father.
“Q. Was his father a partner with you in the shrimp business?
“A. Yes.”

It may be permitted to wonder if the foregoing testimony was thought to be necessary to buttress what was first said concerning Ho’s knowledge of the defendant’s father, in the belief that ordinary contact with one man out of 300 or so laborers would not establish a sufficient knowledge of his family affairs to vindicate the testimony, hence the expediency of a showing of the closer contacts which might be thought to flow from the partnership relation.

This witness says that he speaks and understands the See Yip dialect. The defendant says he speaks the Hok Gar dialect, and one reason for the most recent hearing in court (involving an interpreter versed in the latter dialect) was that the defendant made a statement at the time of his arrest, in reply to questions put to him by the Immigration Inspector, through an interpreter who speaks the See Yip and Sam Yip dialects. The argument has been made that certain questions in that statement were misunderstood by defendant, and certain of the answers were misunderstood by the interpreter, because of this difference in dialects.

Hence, as the same difference is shown in the dialects employed by Ho and the defendant, their mutual capacity for understanding in the interview leading to the identification is necessarily drawn into question; it is said that Ho then spoke Cantonese of which the defendant understood a little.

At- the hearing before the commissioner, the defendant testified that his father was in the shrimp business; when Ho testified at the same hearing, he did not so describe the defendant’s father’s occupation. Nor did he refer to the subject at the first hearing in court. At the second, he not only spoke of the shrimp business, but asserted the partnership. Had his most, recent testimony been deliberately refurbished in the pursuit of plausibility, something • of this kind would have been in order.

It is difficult to assert that Ho’s testimony is wholly incredible, and yet the alleged early knowledge on his part of the defendant’s parents is scarcely convincing when it is reflected that no close personal associations have been shown, such as would cause an old family friend to come forward in the present emergency.

The most that can be said for Ho is that he was in San Francisco during the period covered by defendant’s early years, including his birth, and therefore it would have been possible for him to know of such an event.

The statement made by the defendant at the time of his arrest contains admissions from which it might be concluded that, not having time to reflect upon the situation with which he was confronted, he stated that he came from San Francisco to New York by steamer, instead of by train as he testified in court; and that he didn’t know if he was smuggled into this country from Cuba. That his grandfather was bom in San Francisco, but he did not know where his father was bom.

At the most recent court hearing, he was examined through an interpreter versed in the Hok Gar dialect, and volunteered many answers without the interpreter’s assistance, indicating a very satisfactory command of the English tongue. In most respects, the statement made at the time of arrest corresponds with the testimony before the commissioner, and in court.

Defendant says he is an only child, and that his parents left him in this country in charge of an uncle when he was nine years of age; that the latter died within a year or two, and a friend, now deceased, brought him to-New York, and apparently supervised his progress until he sought employment, and has since supported himself.

- No one is offered as a witness to corroborate any of the alleged incidents of his career since he has lived in and near this city, a matter of nearly twenty years, if his story is true. The only circumstance tending to verify any statement of his is that there was a Chinese restaurant at an Eighth avenue address in 1917, when and where he said he-was employed for two years.

Sufficient time elapsed between the arrest in March, 1930, and the hearing of February 20,1931, to have enabled the defendant to procure from his father a new letter setting forth the facts of birth as they are related by. the defendant; perhaps even to have procured the taking of a-deposition in the father’s present abode. Neither of these things has been done.

The facts herein ai;e not entirely unlike those presented in U. S. v. Horn I¿m (C. C. A.) 223 F. 520, and a like conclusion is thought to be required upon the ground that the defendant has not sustained the burden of affirmative proof, which the law has laid upon him.

Order of the commissioner affirmed.


author: ATWELL, District Judge.

text:
    HOWARD v. TEXAS CO.
    No. 578.
    District Court, N. D. Texas, Wichita Falls Division.
    April 4, 1931.

      H. S. Garrett, of Port Worth, Tex., for the motion.
    Harry Weeks, of Wichita Falls, Tex., opposed.
   ATWELL, District Judge.

Howard, a citizen of Texas, alleges that he was an employee of the Texas Company, a Delaware corporation, and that, while so employed, he was injured and sues for damages in the sum of $100,000. He claims that:

“On or about October 30th, 1928, the plaintiff, A. A. Howard, was one of .the employees of the defendant in the course of such business operations, the plaintiff being employed as a pumper on the Nellie Priedaux lease in Young county, Texas. That at said time the defendant owned other leases in Young county, Texas, in close proximity to this lease, and, for the purpose of pumping the oil wells, maintained power plants with connections to said wells, for the purpose of producing and running the oil therefrom and storing same in the pipe lines and storage tanks to which said pipe lines were connected, and in the course of such operations the defendant had more than three employees at all of such times. That because of these facts, the said defendant was entitled' to become a subscriber under the terms and within the purview of the Workmen’s Compensation Law of the State of Texas, and was entitled to carry a policy of Workmen’s Compensation Insurance in compliance with the terms and provisions of said law; said policy to be issued by one authorized to carry such insurance, but the said defendant failed to secure from one authorized to carry such insurance, an insurance policy and failed to protect the plaintiff with insurance under the provisions of said Workmen’s Compensation Act. That in lieu of securing a policy of insurance from one authorized to carry insurance upon the defendant’s employees, the defendant undertook to carry its own insurance by means of an arrangement through the Security Union Insurance Company of Houston, Texas, but in truth and in fact the risk was not that of the Security Union Insurance Company, but was the risk of this defendant, and the defendant merely paid the Security Union Insurance Company a brokerage or .commission in order to use the name of said Security Union as an insurance carrier, and in order that the Security Union Insurance Company would issue a policy in favor of the defendant on its employees, which policy was to be used by the defendant as a subterfuge and for the evasion of that provision of the Workmen’s Compensation Act of the State of Texas, which prohibits an employer from carrying insurance on his own men under the terms and provisions of said Act; there being an understanding and agreement between the defendant and the Security Union Insurance Company that the risk would be not that of the Security Union Insurance Company, but would be that of the defendant herein. This arrangement as to insurance between the defendant and the Security Union Insurance Company was unknown to the plaintiff and he had nothing to do with such method so employed by the defendant, and had nothing to do with the defendant’s failure to provide insurance for the plaintiff’s protection under the terms of the Workmen’s Compensation Act.”

Under section 3 of the Employers’ Liability Law of Texas, as amended by the Thirty-Fifth (Acts 35th Leg. 1917, c. 103) and Thirty-Eighth (Acts 38th Leg. 1923, c. 177, § B) Legislatures, an employee of a subscriber has no right of action against his employer for damages for injuries received at his work. Griffith v. Associated Emplovers’ Reciprocal (Tex. Civ. App.) 10 S.W.(2d) 129; Gordon v. Ins. Co. (Tex. Civ. App.) 287 S. W. 911.

At the very outset the plaintiff must strike down the policy of insurance which he claims the defendant carried with the Security Union Insurance Company. The battle must be waged at equity. He charges that the defendant’s pretense of having such insurance was a “subterfuge- for the evasion of the compensation act,” which forbids an employer from carrying its own insurance. He also claims that he “had no knowledge of-the defendant’s failure to comply with the act.”

The defendant declines to waive its right to have the equity determined by a chancellor. Great American v. Johnson (C. C. A.) 25 F.(2d) 847.

The making of rules for the easy transfer of causes from the law to the equity docket, and from the equity docket to the law docket, and the willingness of the courts to speed litigation in a practical and sensible manner, must not be taken as' an obliteration of the two systems in the national courts. The Constitution provides that “the judicial power shall extend to all eases of law and equity. * * * ” Const. art. 3, § 2. The acts of Congress likewise maintain the distinction between common law and equity jurisdiction. Law machinery may be largely state made, but equity is obtained according to the rules made by the Supreme Court of the United States, section 913, R. S. U. S. (28 USCA § 723).

Equity rules 22, 23, 26, and 18 (28 USCA § 723), together with 274a and 274b, Judicial Code (28 USCA §§ 397, 398), have no force to destroy this difference. They do not justify the joinder by the plaintiff of matters cognizable in equity and at law. Bucyrus Co. v. McArthur (D. C.) 219 F. 266; Morris v. Texas Working Barrel Mfg. Co. (C. C. A.) 13 F.(2d) 977; Denison v. Keck (C. C. A.) 13 F.(2d) 384. Lawsuits must be where they may have a trial by jury, and! actions in equity must be where an appeal may be made to the conscience of the chancellor. Lindsay v. First Nat. Bank of Shreveport, 156 U. S. 485, 15 S. Ct. 472, 39 L. Ed. 505; Buzard v. Houston, 119 U. S. 347, 7 S. Ct. 249; 30 L. Ed. 451; Scott v. Armstrong, 146 U. S. 499, 13 S. Ct. 148, 36 L. Ed. 1059; Hurt v. Hollingsworth, 100 U. S. 100, 25 L. Ed. 569; Cherokee Nation v. Southern Kansas Ry. Co., 135 U. S. 641, 10 S. Ct. 965, 34 L. Ed. 295; Lantry v. Wallace, 182 U. S. 536, 21 S. Ct. 878, 45 L. Ed. 1218; Cates v. Allen, 149 U. S. 451, 13 S. Ct. 883, 977, 37 L. Ed. 804; Bennett v. Butterworth, 11 How. 669, 13 L. Ed. 859.

These two methods for the administration of justice in the national courts are fundamental. They are grained in the very fabric of the foundation. Utility must be sacrificed, if necessary, for their preservation.

The late eases of Liberty Oil Co. v. Condon National Bank, 260 U. S. 235, 43 S. Ct. 118, 67 L. Ed. 232, and Twist v. Prairie Oil & Gas Co., 274 U. S. 689, 47 S. Ct. 755, 71 L. Ed. 1297, caution and inspirit us in this thought. When there are so many assaults being made upon established institutions, it is well for the bench and bar to preserve such distinctions and such fundamental outlines as have been productive of a splendid jurisprudence and an orderly .administration.

The practical side appears in a case such as Lyons v. Goffe (C. C. A.) 46 F.(2d) 241, 244, where it is ruled that under 274a, Judicial Code, 28 USCA § 397, if upon the presentment of an application for equitable interposition an “adequate remedy at law” is apparent, the cause will not be dismissed but will go to the law docket.

The plaintiff, having interwoven into his cause of action an equity without which he would have no suit against the defendant, must litigate on that side of the docket as to that, and the motion to transfer is sustained.


author: OTIS, District Judge.

text:
    UNITED STATES v. SPALLO.
    No. 10498.
    District Court, W. D. Missouri, W. D.
    March 10, 1931.
    Claude Curtis, Asst. U. S. Atty., of Kansas City, Mo. (Wm. L. Vandeventer, U. S. Atty., of Kansas City, Mo., on the brief), for the United States.
    Frank D. Rader, of Kansas City, Mo., for defendant.
    Hershel H. Goodman, of Kansas City, Mo., for intervener.
   OTIS, District Judge.

On January 15, 1931, one Phillip Spallo was indicted by the grand jury in this district for th,e unlawful transportation for beverage purposes of four pints of whisky in a Ford coach automobile, motor No. A-3059124. On the 30th day of January, 1931, he entered a plea of guilty to that charge and was sentenced to the payment of a fine. At the time of his plea it was shown to the court and admitted by the defendant that at the time of defendant’s arrest he was, as charged, transporting whisky in the automobile in question; that the automobile was seized by the officers at the time of the arrest of the defendant; that it had since been held in custody; and that the defendant was, at the time of his arrest and at the time also of his conviction, the sole owner of the automobile. After this showing and upon oral motion of the United States attorney and coincident with the imposition of sentence on the defendant, the automobile was ordered sold pursuant to the provisions of section 26, tit. 2, of the National Prohibition Act (27 USCA § 46). Thereupon the defendant filed and presented his motion for the return of the automobile to him, setting up as grounds for said motion the following:

1. That no libel suit or separate proceeding of any kind has been instituted asking for the forfeiture of said automobile under title 2, section 26, of the National Prohibition Act.

2. That the court does not have jurisdiction to forfeit said car as an incident to eriininal prosecution and plea of guilty or conviction of defendant hy ordering car sold without having first instituted a separate proceeding for the forfeiture or libel of said car.

3. That the court has no jurisdiction to forfeit or order said ear sold as an incident to criminal prosecution for the reason that, this being an action in rem, a proceeding must first he had in rem and said forfeiture or order selling said ear based on a proper libel action.

°4. For the reason that the libel proceedings herein are insufficient and do not comply with the law.

5. That the court has no jurisdiction to forfeit said car without a proceeding in rem or proper libel instituted against said ear and the ordering for sale or forfeiture of said car without said proceedings and as an incident to the criminal prosecution herein, is a violation of the defendant’s constitutional rights, in this, that it takes the property of the defendant without due process of law as provided in Amendment 14 to the Constitution of the United States.

The procedure adopted in this case was that which always has been followed in this district and which heretofore has not been questioned by any one. It has been represented to the court that a like procedure is followed in many districts of the United States, hut it has also been represented to the court that iu many districts the institution of a separate and (distinet action against an offending vehicle is required before the vehicle is ordered sold as provided for in section 26. This information, taken in connection with the present motion, seems to require some further examination of the law to the end that it may he, at least as far as this district is concerned, finally determined what is the right course to pursue in matters of this character.

Two principal questions present themselves: First, what procedure is contemplated hy and provided for in section 26? Second, if the procedure intended by that section is the simple one which has been adopted and followed here, then does the section violate the constitutional inhibition against the taking of property without due process of law? I propose to consider both of these questions in this memorandum, although the second question might he avoided as not being properly raised, since it goes without saying that in no event would the Fourteenth Amendment he violated. That amendment prohibits only the taking of property without due process of law hy the states, and has no application to the United States. The similar provision, however, of the Fifth Amendment does restrict the power of the United States, and I shall consider the constitutional question as if it had been properly raised with reference to the Fifth Amendment.

1. So far as is here pertinent, section 26, tit. 2-, of the National Prohibition Act (27 USCA § 40), reads as follows: “When * * * any officer of the law shall discover any person in the act of transporting in violation of the law, intoxicating liquors in any * * * automobile * * * it shall be his duty to seize any and all intoxicating liquors found therein being transported contrary to law. Whenever intoxicating liquors transported or possessed illegally shall he seized by an officer and he shall take possession of the + 81 * automobile * 81 and shall arrest any person in charge thereof. Such officer shall at once proceed against the person arrested under the provisions of this chapter in any court having competent jurisdiction; but the said vehicle or conveyance shall be returned to the owner upon execution by him of a good and valid bond, with sufficient sureties, in a sum double the value of the property, which said bond shall be approved by said officer and shall be conditioned to return said property to the custody of said officer on the day of trial to abide- the judgment of the court. The court upon conviction of the person so arrested shall order the liquor destroyed, and unless good cause to the contrary is shown by the owner, shall order a sale by public auction of the property seized, and the officer malting the sale, after deducting the-expenses of keeping the property, the fee for the seizure, and the cost of the sale, shall pay all liens, according to their priorities,, which are established, by intervention or otherwise at said hearing or in other proceeding brought for said purpose, ’as being bona fide and as having been created without the lienor having any notice that the carrying vehicle was being used or was to be used for illegal transportation of liquor, and shall pay the balance of the proceeds into the Treasury of the United States as miscellaneous receipts. * * * ÍÍ

For the present considering only the language of this statute, laying aside for further consideration all' opinions of courts construing it, it seems clearly to authorize the procedure which has been adopted and followed in this district. Indeed I can find no difficulty whatever in the language which is employed. The statute provides that the arresting officer shall seize the automobile-at the time of the arrest. That was done here. It provides by necessary implication that, if no bond is given (and none was given in this ease), the automobile shall be retained in custody by the arresting officer or hy some other officer of the court. It provides that, if a bond is given, it shall be conditioned upon the return of the automobile to the custody of the arresting officer “on the day of trial to abide the judgment of the court.” In other words, the statute clearly provides that, whether a bond is given or whether the automobile is retained by the arresting officer, the disposition of the property is to “abide the judgment of the court” “on the day of trial.” But the only “trial” contemplated by the language of the statute quite apparently is • the trial of the “person arrested,” such a trial as under the provisions of the National Prohibition Act will follow if the arresting officer does “at once proceed against the person arrested under the provisions of this chapter in any court having competent jurisdiction.” Nowhere in the National Prohibition Act is there any provision for a separate and independent proceeding in rem against a captured automobile. That the disposition of the automobile is “to abide the judgment of the court” “on the day of trial” of the person arrested for the offense of transporting intoxicating liquor is further emphasized by the immediately succeeding language, “the court upon conviction of the person so arrested * * * unless good cause to the contrary is shown by the owner, shall order a sale by public auction of the property seized. * * * ” Here is no other prerequisite required before the order of sale shall be made than that the person arrested shall be convicted, and that by necessary implication he shall, at the time of his trial, upon the charge of unlawful transportation, have opportunity affirmatively to show “good cause,” if any he has, why the automobile shall not be ordered sold. 'That no independent and separate proceeding in rem is necessarily contemplated by the act is still further emphasized by its later language to the effect that, even if others than the arrested person claim to have interests in the captured automobile, those interests are to be asserted “by intervention or otherwise at said hearing or in other proceeding brought for said purpose. '* * ” The effect of this additional language is to emphasize what otherwise is the clear meaning of the statute. The words “at said hearing” can have reference only to the previous phrase “the day of trial”; that is to say, the trial of the accused person for unlawfully transporting intoxicating liquor. That “hearing” is, in this additional language, once more indicated as the hearing at which the order of sale may1 be made, although it is also provided that another and independent “proceeding” may be “brought for said purpose”; that is, for the purpose of securing an order of sale. To say that this statute requires an independent proceeding in rem against a captured automobile with a pleading other than the indictment, with notice to the owner of the automobile, when it is conceded that the indicted person is the owner, with a separate hearing to determine the issue as to whether the automobile seized was being used by its owner in the unlawful transportation of liquor, when that issue is essential and fully determined in the criminal proceeding, is to read into the statute what is not there at all, what, if it had been intended, could so easily have been provided for, and what, if it had been required, would have been an absurd duplication of the same pleading, notice, procedure, and judgment.

Perhaps the Supreme Court of the United States has not directly passed on the question here presented. That court, however, by clear dictum, has said that section 26 requires an order of sale of an automobile seized under the circumstances here as an incident of the trial of the person arrested and not as the result of a separate and independent proceeding.

In United States v. One Ford Coupé, 272 U. S. 321, 47 S. Ct. 154, 158, 71 L. Ed. 279, 47 A. L. R. 1025, the question for determination "was whether section 26, tit. 2, of the National Prohibition Act (27 USCA § 40), impliedly repealed section 3450 of the Revised Statutes (26 USCA § 1182). That that question might be answered, it was necessary to determine the exact purpose and effect of section 26. In that connection the Supreme Court said of section 26, in so far as it has to do with the forfeiture of automobiles taken in connection with unlawful transportation of intoxicating liquor, that “under section 26 a person is the offender and the forfeiture of the vehicle extends only to the interests of those who share in his guilt by having notice that it was to be used for the illegal purpose,” and again that section 26 “applies solely to cases of forfeiture incident to the prosecution, as therein provided, of a person transporting liquor by a vehicle in violation of the Prohibition Act” and again that section 26 provides “that, in case of conviction of the person, the vehicle shall be sold under conditions and in a manner prescribed.” All of this language is inconsistent with the theory of the present motion, that a separate action in rem against the captured automobile must be instituted and prosecuted to judgment. It is the “person” who “is the offender,” says the Supreme Court; that is to say, it is the person as distinguished from the vehicle. The forfeiture is “incident to the prosecution,” not something that is the result of an independent and separate proceeding. Moreover, the Supreme Court does not read into the statute other provisions than those appearing in it, but says of it that “in case of conviction of the person, the vehicle shall be sold under conditions and in a manner prescribed.” The Supreme Court does not suggest that there is any other prerequisite to the order of sale than that the offending person shall have been convicted. I consider that the opinion in this ease involves an understanding of section 26 identical with that followed by the practice in this district.

But the case of Port Gardner Investment Co. v. United States, 272 U. S. 564, 47 S. Ct. 165, 71 L. Ed. 412, when that case is carefully studied, seems to me to be conclusive upon the question here.

In that case an action had been instituted under section 3450 to forfeit an automobile, the driver of which had been arrested, charged with violating the National Prohibition Act by transporting intoxicating liquor; the automobile being seized by the arresting officers. The driver had entered a plea of guilty to the charge of transportation in this automobile. An intervener claiming some title to the automobile contended that in that situation a proceeding under section 3450 would not lie, since the forfeiture of the seized automobile, subject to the rights of innocent third parties, followed as an incident of conviction of the arrested driver and without any separate action taken to forfeit. It is to be noted that no separate proceeding had been instituted in rem against the automobile under section 26 or in connection with the prosecution of the driver for transportation, notwithstanding which the Supreme Court said: “The disposition of the automobile prescribed in section 26 became mandatory after (the driver’s) conviction, and, being inconsistent with the disposition under section 3450, necessarily precluded resort to proceedings under the latter section.”

The only meaning that can be given to this decision is that an order of sale is mandatory upon the conviction of the offending person, without more, and therefore certainly without any other proceeding directed to the automobile specifically. That conclusion is clear also from a consideration of the affirmative answer given by the Supreme Court to the question' propounded by the Court of Appeals, which was, “Did the prosecution of the driver of the car under the National Prohibition Act constitute an election by the government to proceed under section 26 of that aet and thereby prevent the forfeiture of the car under section 3450 of the Revised Statutes of the United States?” Certainly if a proceeding, separate and independent from the prosecution of a person, is necessary to accomplish a forfeiture of a car under section 26, then the prosecution of the person could not by itself constitute an election to proceed under section 26 against the automobile. It is only upon the theory1 that forfeiture under section 26 is incidental to and a necessary resultant of prosecution and conviction of the person (unless good cause be shown for nonforfeiture) that the affirmative ahswer given by the Supreme Court to the question propounded to it can be justified.

The concluding paragraph of the opinion in this same ease further supports the view of the decision just stated. That concluding paragraph is: “We need not determine whether the mere commencement of a proceeding under Section 26 constitutes an election. Nor need we give specific answers to the other questions asked, since the certificate does not diselose any reason why the sale of the automobile, subject to the interests of innocent parties, should not have been ordered by the District Court after the conviction of Neadeau,” the driver.

This language can only mean that, in the absence of some reason why a captured automobile should not be ordered sold, some reason arising, not from the statute, but from the facts, its sale should be ordered after conviction and that without any separate and independent proceeding.

2. The attack on the constitutionality of section 26, if it be construed as herein indicated, seems to me without merit. That property used for violation of law may be constitutionally confiscated and sold is, of course, well established. In some instances it may even be summarily destroyed 'by the seizing officers. Lawton v. Steele, 152 U. S. 133, 14 S. Ct. 499, 38 L. Ed. 385. In any event, where property has been used as a means for violating law, it is sufficient to due process in connection with its confiscation that the owner have notice and opportunity to be heard. Section 26 provides both for notice and opportunity to be heard. What more complete notice could there be than the seizure of the automobile to await the trial of the owner for unlawful transportation. At that trial the owner has every possible opportunity to be heard touching his own offense, which must be proved beyond a reasonable doubt, and touching also the participation in the offense of the seized ear.

Compare with this ease United States v. Pierson (D. C.) 44 F.(2d) 852.

Defendant’s motion is denied.


author: WOODROUGH, District Judge.

text:
    HESSEN SIAK SHAMS v. NEBRASKA STATE BANK OF BLOOMFIELD, NEB.
    No. 272.
    District Court, D. Nebraska, Norfolk Division.
    April 10, 1931.

      M. F. Harrington, of O’Neill, Neb., for plaintiff.
    Kelsey & Kelsey, of Norfolk, Neb., for defendant.
   WOODROUGH, District Judge.

The plaintiff, an alien, native of Syria, sues the Nebraska State Bank of Bloomfield, Neb., in an action at law to recover upon two certificates of deposit, one issued to him in September, 1928, and one in October, 1928. The case is submitted for judgment upon the pleadings, a motion to bring an additional party into the ease, a stipulation of facts, argument of counsel, and briefs.

It appears that the state bank in which the deposits were made became insolvent in February, 1929, and the department of trade and commerce of the state of Nebraska took possession of it as provided by law for the purpose of administering and disposing of its affairs.

Thereafter, and on the 30th of April, 1929, an amendment to the state banking laws of Nebraska went into effect authorizing so-called reorganization of banks which had been taken over by the department of trade and commerce, and, all the depositors and unsecured creditors of the bank excepting the plaintiff and one other having consented thereto, a reorganization plan was carried out and consummated in May, 1929. The plan conforms to the new statute, which is as follows (Banks and Banking, 8-181, Comp. St. 1929):

“If the Secretary of the Department of Trade .and Commerce with a view of restoring the solvency of any bank of which the department has taken charge pursuant to law shall approve a reorganization plan entered into between depositors and unsecured creditors representing eighty-five per cent, or more of the total amount of deposits and unsecured claims of such bank on the one hand and the hank or reorganizers thereof on the other, then and in such ease all other depositors and unsecured creditors shall be held to be subject to such agreement to the same extent and with the same effect as if they had joined in the execution thereof, and their claims shall be treated in all respects as if they had joined in the execution of such articles of reorganization, in the event of restoration of such bank to solvency and the re-opening of the same for business. Any county, city, village, township or school district, through its governing board, and the State, through the governor, may enter such agreement. (R. S. 1913, 328; 1919 p. 705; C. S. 1922, 8029; 1923 p. 443; 1925 p. 122; 1929 p. 164.)”

The effect of the steps, which have been taken is that new and amended articles of incorporation are adopted for “Nebraska State Bank” of Bloomfield (the name of the old bank being “The Nebraska State Bank”). Under these new and amended articles new capital stock is subscribed for by persons not stockholders in the old corporation in the par amount of $25,000 and issued at $140 a share so as to provide $10,000 surplus above the capital. The aggregate of deposits and unsecured debts of the insolvent bank was $599,516.56, and its good assets amounting to 75 per cent, of this sum were transferred by tbe department of trade and commerce, and tbe old bank to tbe new or reorganized corporation, in consideration that it assumed to pay to each depositor and unsecured creditor 75 cents on tbe dollar in payments of 10 per cent, a month. The rest of the old bank’s assets, including all rights and claims of the creditors against the bank, its officers, directors and stockholders, were turned over to a corporation called “Bloomfield Liquidation Association.” This association has to liquidate these assets and administer in the interest of creditors. ■

The reorganized corporation, “Nebraska State Bank,” has tendered, and does tender, to the plaintiff the whole amount of 75 cents on the dollar of his deposits. The Bloomfield Liquidation Association has not been made a party here. The plaintiff says that the amendment under which this scheme of reorganization payment of 75 cents on the dollar and liquidation for creditors proceeds is unconstitutional, and not binding on him. He says that he had a right to sue the bank, get a judgment against it, and through receiver and other process out of this court subject the assets of all kinds to the payment of his debt; that the law authorizing the reorganization plan and the steps taken under it impair the obligation of his contract, and deny him due process, and are void as to him.

The reorganized bank says that it is to all practical intent a new corporation; that it cannot be made liable for the debts of the old corporation beyond the assets it has received; that it has accounted for all such assets with all other creditors except the plaintiff and one other to the full extent of the interest of each, and it tenders to the plaintiff his just full share; that the plaintiff therefore should have nothing against it. It presents further that if, notwithstanding the amendment to the banking laws and the reorganization plan that has been effected pursuant to it, the plaintiff has some right of action, then the Liquidation Association is a necessary party.

It will be noted that the 1930 amendment provides, among other things, that, after 85 per cent, of the unsecured creditors and depositors have entered into the reorganization plan, “all other depositors and unsecured creditors shall be held subject-to the agreement to the same extent and with the same effeet as if they had joined in the execution thereof, and their claims shall be treated in all respects as if they had joined in the execution of such articles of reorganization.”

It is clear that the depositors and unse- ■ cured creditors who have joined in the reorganization plan could not maintain such an action as the plaintiff here presents, because they would be bound by voluntary contracts to look to the new organization for 75 per cent, of their money and to the Liquidation Association for their share of the balance. They have made new contracts, 'and are bound thereby.

But this plaintiff has made no new contracts, and it was not within the power of the Legislature to impair by statutory enactment the obligation of the contract he had nor to deprive him of any of his substantial security. If, therefore, the reorganization plan of the statute and what has been done under it accomplish such a wrong to the plaintiff, he cannot be without remedy in this court. The mere fact that others who were similarly situated with himself are willing to agree in no wise affects his substantial rights. In this ease the proportionate number of those who have entered into the new agreement is very large, including, as it does, all creditors but two. The principle, however, cannot be otherwise than if there had been only 50 per cent, named in the statute instead of 85 per cent. Whatever rights the plaintiff has are his own, though he comes from Syria and is only one of two depositors standing out.

The real question, therefore, is whether he has been deprived of anything of substance.

At the time the plaintiff made his deposits in the old bank, the Nebraska law provided an elaborate system for the protection of depositors in the state banks in cases of insolvency of the banks, including what is called the bank guaranty fund. But at no time for many years have such depositors had any right after insolvency of the bank to seize upon its assets by mesne or final processes of the courts. The plan of the various laws always contemplated an equitable division of the proceeds of liquidation among creditors according to their respective interests.

There were at all times provisions for the enforcement of stockholders’ double liability and also to enforce .any obligations of officers and directors resulting from malfeasance.

The plaintiff- accordingly claims that the reorganization plan deprived him of these means, and therefore his right to cause the stockholders to respond to their double liability fixed by the Constitution of the state and the officers and directors to account for excess or improvident loans and such misconduct. I am of opinion that these were substantial rights of the plaintiff incident to his contract as a depositor, and, under the reorganization plan, neither the department of the state nor the state court has reserved any powers to enforce the rights. All initiative is left with the liquidating association.

As the plaintiff is not a party to that association, he is entitled to his day in court, and is entitled to maintain this action, notwithstanding the provisions of the 1930 act to the contrary. As to the form of his action at law upon his certificates, it is justified under the ruling of the circuit court of this circuit in Metropolitan Sav. Bank & Trust Co. v. Farmers’ State Bank, 20 F.(2d) 775.

Upon the facts stipulated, the plaintiff is entitled to have judgment upon his certificates of deposit less the payments admitted, together with interest according to the terms of the certificates.

But, though the plaintiff is so entitled to judgment, the form and measure of his relief is controlled by the facts and the situation. He is not entitled to any judgment operative upon the reorganized bank nor to any execution or relief against the same. It incurred no liability of any kind to the plaintiff beyond the obligation to account to him for a proportionate amount of the assets of the old bank taken by it. This court should and does take notice of the tender made by the reorganization.

For, the purpose of rendering effective the judgment so to be entered against the old bank, the “Bloomfield Liquidation Association” shall be made a party defendant herein, ,as moved by the reorganization, and shall render an account within - days of whatever steps it has taken and whatever means it has to satisfy the claims of the plaintiff as a judgment creditor to the extent of his deposits.

In the meantime no execution shall issue on the judgment. I submit for consideration of counsel the form of judgment entry.


author: PATTERSON, District Judge.

text:
    ARTLOOM CORPORATION v. NATIONAL BETTER BUSINESS BUREAU, Inc., et al.
    District Court, S. D. New York.
    April 1, 1931.
    Clarke, Allen, Harper & Matthews, of New York City, and Fraley & Paul, of Philadelphia, Pa. (Frank B. Fox, of Philadelphia, Pa., of counsel), for plaintiff.
    White & Case, of New York City, for defendants National Better Business Bureau, Inc., and Edward L. Greene.
    Breed, Abbott & Morgan, of New York City, for defendant Better Business Bureau of New York City, Inc.
   PATTERSON, District Judge.

This is a motion for preliminary injunction to restrain the defendants pendente lite from announcing to the plaintiff’s customers and to the public generally the fact that the Federal Trade Commission has issued an order that the plaintiff cease and desist from using the word “Wilton” in describing one type of rug manufactured by it.

The plaintiff manufactures rugs. National Better Business Bureau, Inc., is a membership corporation whose aim is to promote truthfulness in merchandising and advertising. The Better Business Bureau of New York City, Inc., is also a membership corporation, with activities more local in extent. There are numerous similar bureaus scattered over the United States, independent of one another so far as control is concerned, but associated in the sense that they exchange information. It seems that several years ago a discussion arose between the plaintiff and the National Bureau as to whether certain rugs made by the former came within the definition of a Wilton rug. It is not entirely clear who .initiated the discussion, and I cannot see that it matters. The National Bureau submitted the point to the Bureau of Standards of the Department of Commerce and was advised by it that the plaintiff’s rugs did not come within the specifications of a Wilton carpet as adopted by an association of manufacturers. A little later Better Business Bureaus in several cities issued circulars asking dealers not to advertise the rugs as Wiltons. It may be inferred that the National Bureau had communicated with the local bureaus on the matter. Thereafter the Federal Trade Commission instituted proceedings against the plaintiff. The plaintiff advised the National Bureau of the pendency of the proceedings and requested that further comment on its products be withheld until a decision should be handed down by the Commission. It appears that the National Bureau complied' with the request and said nothing further. So much for the background of the case.

On February 9', 1931, the proceedings before the Federal Trade Commission culminated in an order that the plaintiff cease and desist from advertising its Bagdad rug as a Wilton rug. Two days later the plaintiff brought this suit, to enjoin the defendants from publishing or commenting upon /his order to the plaintiff’s customers, the trade and the public generally. A preliminary injunction is asked for. In support of the application, it is pointed out that the order of the Federal Trade Commission is not effective unless and until affirmed by the Circuit Court of Appeals, which is true in the sense that in the interim the plaintiff is not obliged to obey the order of the Commission; and it is said that the customers and the public do not appreciate this fact. The plaintiff’s papers do not show whether it is now paying any attention to the order. It also appears that on March 2, 1931, while this application was pending, the Federal Trade Commission itself released to the press an announcement of the order, and that shortly afterward several newspapers, as well as other organizations issuing bulletins on business affairs, published the news that the order had been issued.

I have given careful consideration to the facts urged by the plaintiff and to the authorities marshaled in support of its position, but remain of the opinion, which I expressed at the oral argument, that on no possible view of the facts can a preliminary injunction be granted in this ease. The parties have discussed whether a court of equity may enjoin a defendant from publishing a libel. While service is still being paid to the rule that a court of equity will not enjoin a threatened libel, a growing body of cases has established several exceptions or qualifications to the rule. For one thing, it is now generally recognized that charges of invalidity of a trader’s patents and threats to sue his customers, when made under circumstances showing that there is no real intent to bring suit, will be enjoined. Emack v. Kane (C. C.) 34 F. 46; Farquhar Co. v. National Harrow Co. (C. C. A.) 102 F. 714, 49 L. R. A. 755; Adriance, Platt & Co. v. National Harrow Co. (C. C. A.) 121 F. 827; Racine Paper Goods Co. v. Dittgen (C. C. A.) 171 F. 631; Atlas Underwear Co. v. Cooper Underwear Co. (D. C.) 210 F. 347; Sun-Maid Raisin Growers v. Avis (D. C.) 25 F.(2d) 303. It is said that injunction in such eases is allowed because of the unfair competition feature found in the threats, that the libel is merely incidental and may therefore be enjoined without violating the usual rule. Again, libelous statements, coupled with advice to customers to break contracts, have been enjoined, although conceivably only the portion relating to the breach of contracts might have been restrained. American Malting Co. v. Keitel (C. C. A.) 209 F. 351; see Citizens’ Light Heat & Power Co. v. Montgomery Light & Water Power Co. (C. C.) 171 F. 553. Still another line of cases stands for the proposition that, where a party to a trade dispute has published to customers of another or to the trade generally an account of a court proceeding which is garbled, misleading, and prejudicial, the continuance of such a practice may be enjoined and other relief given. Asbestos Shingle Co. v. Johns-Manville Co. (C. C.) 189 F. 611; Rollman Mfg. Co. v. Universal Hardware Works (C. C. A.) 238 F. 568; Gerosa v. Apco Mfg. Co. (C. C. A.) 299 F. 19; Price-Hollister Co. v. Warford Corporation (D. C.) 18 F.(2d) 129; Hoover Co. v. Sesquicentennial Exhibition Association (D. C.) 26 F.(2d) 821; Adjusta Co. v. Alma Mfg. Co. (D. C.) 36 F.(2d) 105; Gardner Sign Co. v. Claude Neon Lights, Inc., (D. C.) 36 F.(2d) 827. The explanation that the court acts in such matters to protect its own orders or decrees is hardly adequate, for sometimes the orders or decrees distorted by the offender-have been those of other courts.

The reasonableness of the rule or alleged rule that equity will not enjoin a libel has been attacked by Dean Pound in a thoughtful article in 29 Harvard Law Review, 640. He points out that the true inquiry in these cases should be whether the plaintiff has made out a very plain ease of libel and of inadequacy of the legal remedy, just as in the ease of other torts. If so, no substantial question of free speech or trial by jury is involved, and the plaintiff is entitled to an injunction, even to a preliminary injunction in a strong case. The necessity of inventing exceptions to the prevailing rule, to prevent a failure of justice, would thus be done away with and many of the authorities reconciled in result, though extreme eases like Boston Diatite Co. v. Florence Mfg. Co., 114 Mass. 69, 19 Am. Rep. 310, and Marlin Firearms Co. v. Shields, 171 N. Y. 384, 64 N. E. 163, 59 L. R. A. 310, would be abandoned. That the courts are in practice generally applying the test outlined by Dean Pound seems clear.

But whatever doubt there may be at the present day as to the jurisdiction of a court of equity to enjoin a future libel, I am convinced that the plaintiff here has not even the shadow of a case. For the threatened libel, if any, would be prima facie a privileged communication. The order of the Federal Trade Commission, directing the plaintiff to cease and desist advertising one of its rugs as a Wilton is a public record, made after a hearing before an administrative board to determine whether the plaintiff was using an unfair method of competition in commerce. Before commencement of proceedings, the Commission must be of opinion that an investigation “would be to the interest of the public.” Act Sept. 26, 1914, § 5 (15 USCA § 45). If Congress had intended that the existence of such an order be kept confidential until its propriety should be questioned in court, it could and would have so provided. The plaintiff’s statement that the order is a nullity without further action by the courts is not a fair characterization; it is much more than a nullity. Any newspaper in the land may publish such an order or a fair summary of it, provided it does so without express malice against the plaintiff. For such publication it could not be held liable for damages, much less enjoined in advance, and this irrespective of the truth of the facts stated in the order. The qualified-privilege to publish such proceedings extends to administrative and legislative matters as well as to proceedings in court. Cresson v. Louisville Courier-Journal (C. C. A.) 299 F. 487; Conner v. Standard Co., 183 Mass. 474, 67 N. E. 596. And a newspaper’s right to publish the result of such a proceeding is no greater than that of any other member of the community. Lawyers’ Co-op. Publishing Co. v. West Publishing Co., 32 App. Div. 585, 52 N. Y. S. 1120. There is no proof of bad faith or malice on the part of any defendant and I certainly cannot say now that any communication which they may make in respect to the order will not be a fair summary of it. The position taken by the plaintiff, that it has the right to enjoin these defendants from publishing or announcing an order issued and made public by the Federal Trade Commission, or any similar public body, would establish an intolerable censorship over the right of free speech. It is not law and ought not to be law. The case bears no resemblance to Adjusta Co. v. Alma Mfg. Co., supra, and kindred eases. The feature in those cases was that the offender had flagrantly misstated the effect of a court order, and the injunction was against the continuance of the practice. Nor is there anything in the ease which suggests a boycott or menacing conduct by the defendants.

The plaintiff has also set forth several matters tending to show that the order of the Commission may have been improper. For any errors by the Commission, the plaintiff has its statutory remedy by direct attack upon the order in the Circuit Court of Appeals. They cannot be considered here.

The application for a preliminary injunction will therefore be denied.


author: BARRETT, District Judge.

text:
    J. P. STEVENS ENGRAVING CO. v. UNITED STATES.
    No. 1245.
    District Court, N. D. Georgia.
    Feb. 23, 1931.

      Sutherland & Tuttle, of Atlanta, Ga., for plaintiff.
    C. P. Goree, Asst. U. S. Atty., of Atlanta, Ga., for the United States.
   BARRETT, District Judge.

Subsequent to the decision of Judge Sibley in this case on November 20, 1930, bas.ed upon an opinion dated November 15, 1930 (44 F.[2d] 822), the Supreme Court of the United States on January 5, 1931, in the case of Charles H. Stange v. United States, 282 U. S. 270, 51 S. Ct. 145,148, 75 L. Ed., decided that a waiver executed after the right to collect the tax had become barred was valid and effective. Motion is now made to set aside the judgment overruling the demurrer and that such demurrer shall be now sustained'.

Complainant recognizes that the decision in the Stange Case as to the time of waiver controls in this case, and that if Judge Sibley’s opinion rested solely upon the question as to the validity of the waiver executed after the bar of the statute the grant of the present motion would be proper; but it is insisted that there are other issues in the petition which when decided will sustain its contention and which were not decided by Judge Sibley because of what he thought was the controlling fact, namely, that the waiver had been executed after the bar of the statute had arisen as to the tax of 1921 and was therefore ineffective. Such alleged undecided issues are now dealt with.

1. As to the alleged lack of authority of Paul Dixon to sign the name of plaintiff (even though by stamp) as “Sect’y & Treas., Taxpayer,” Judge Sibley apparently dealt with this feature, and I concur with his conclusion that, “This fiscal officer of the corporation, who must swear to its return and who is charged with the duty of paying its taxes, prima faeie has the authority to make this consent.” '

Subsequent to the decision of Judge' Sibley there was brought to my attention the case of Panther Rubber Mfg. Co. v. Commissioner of Int. Rev., 45 F.(2d) 314 (C. C. A., First Circuit), decided November 26, 1930. The waiver there was by the president and challenge was made of his authority. The question was not decided, but the court uses this language: “We have grave doubts of the president’s .authority, under the by-laws of these companies, to execute such a waiver after the statutory period has expired.” It will be noted that reference is made to the by-laws, the provisions of which are not brought to our attention. It may well be that the president’s authority was so limited by the by-laws of these companies, but there is nothing before us in the instant case showing any such limitation upon the powers of the secretary .and treasurer.

2. A fair interpretation of the petition is that the mistake “as to the expiration of the statutory period of limitations applicable to assessment and collection of taxes for plaintiff’s fiscal year ended July 31, 1921,” was mutual. There are no allegations warranting a conclusion that plaintiff was acting under duress or fraud.

Authorities abound that generally “knowledge of the existence of the right, benefit or advantage on the part of the party claimed to have made the waiver is an essential prerequisite to its relinquishment. No one can be said to have waived that which he does not know: or where he has acted under a misapprehension of facts.” 40 Cyc. p. 259; 27 R. C. L. p. 908; Bouv. Law Dict. Vol. 3, page 3417; Panther Rubber Mfg. Co. Case, supra. The above principle seems to me to be sound and would cause me to over-' rule the demurrer were it not for the last sentence in the paragraph below quoted from the Stange Case, viz.: “In November, 1922, both parties understood that the tax would be assessed and collected after a proper consideration of the taxpayer’s objections to any additional assessment. To secure sufficient time for this purpose, the so-called waiver was executed. The failure to insert in the written consent words expressly waiving the statutory limitation upon collection is explained by the belief prevailing prior to the decision in Bowers v. N. Y. & Albany Lighterage Company, 273 U. S. 346, 47 S. Ct. 389, 71 L. Ed. 676, that distraint, the common-method for coercing payment, was. possible even when the statutory period for collection by suit had expired. That the parties at the time may have believed that collection was possible independent of any waiver, does not make less effective the instrument given for the purpose of tolling the limitation on the ultimate determination and collection of the tax.”

I am inclined to think that such sentence may be obiter, inasmuch as the precise question was not argued, but am not sufficiently satisfied of that to disregard its otherwise controlling effect.

3. No consideration was necessary to sustain the waiver. Loewer Realty Co. v. Anderson, Collector of Int. Rev. (C. C. A.) 31 F. (2d) 268, 270.

4. This opinion is after the allowance of the amendment by plaintiff on February 18, 1931, and presentation by defendant of its demurrer to the petition as amended.

Therefore a rehearing is granted, and the demurrer of the government is sustained.


text:
    WAILES DOVE-HERMISTON CORPORATION v. OKLAHOMA CONTRACTING CO.
    No. 3288—543.
    District Court, N. D. Texas, Dallas Division.
    March 13, 1931.
    Samuel W. Foster and T. Hart Anderson, both of New York City, and Geo. O. Wilson, of Dallas, Tex., for complainant.
    Charles E. Townsend and Thomas G. Goulden, both of San Francisco, Cal., and J. Hart Willis, of Dallas, Tex., for respondent.
   ATWELL, District Judge.

Metal pipe lines that carry gas, water, and petroleum are buried in the ground. There is a soil stress from present chemicals and from the soil and temperature against which science has contended. The plaintiff’s patent No. 1733006 covers a method for coating pipe which is to be placed in the trench. The liquid itself doubtless has many merchantable virtues, and contributes tremendously to the efficacy and value of .the coating so administered.

The evidence discloses’ that as early as 1912 there was a rotary motion of the pipe at the time of the application of the fluid. The plaintiff’s method of having a man hold a noninflammable and nonconducting pad to the revolving pipe as another man pours the hot liquid on, which liquid becomes an enamel, and does away with cloth or wrappings that had theretofore been used in conjunction with fluids, has little, if any, invention in it, when viewed in the light of the prior art. One may get an idea from a model. The model may be never so small. One may get an idea from a printer’s roll.

If we assume that the printer’s roll,.as disclosed in a prior patent, was an anticipation, that would be fatal to the plaintiff’s prayer. The suggestions shown here must have been of inestimable value in the pursuit of remedies- against destroyers which the earth held for metal pipe.

The commercial success of a product, without novelty, cannot aid the patent therefor, nor is adjustability an invention. It is rather an exercise of mechanical skill. Paquette v. Potter Mfg. Co. (C. C. A.) 46 F. (2d) 271; Thropp’s Sons Co. v. Seiberling, 264 U. S., 320, 44 S. Ct. 346, 68 L. Ed. 708.

The pressing of an asbestos glove by one of the workers on the hot fluid as it is poured from a spouted receptacle by another worker is naturally but the substitution of the hand for the pressure of the spout in an earlier patent, or for the action of gravity upon the fluid by earlier users, or for the cloth or sling that had been used a long time before the issuance of the instant patent. This change involved adjustability, and adjustability is not invention. Peters v. Hanson, 129 U. S. 541, 9 S. Ct. 393, 32 L. Ed. 742. Nor is the use of equivalents. Western Willite v. Trinidad Asphalt Mfg. Co. (C. C. A.) 16 F.(2d) 446. See also, Brown v. Davis, 116 U. S. 237, 6 S. Ct. 379, 29 L. Ed. 659; Morley Sewing Mach. Co. v. Lancaster, 129 U. S. 263, 9 S. Ct. 299, 32 L. Ed. 715; Consolidated Safety Valve Co. v. Crosby, etc. Co., 113 U. S. 157, 5 S. Ct. 513, 28 L. Ed. 939; Crouch v. Roemer, 103 U. S. 797, 26 L. Ed. 426; Marchand v. Emken, 132 U. S. 195, 10 S. Ct. 65, 33 L. Ed. 332; Union Paper Bag Mach. Co. v. Murphy, 97 U. S. 120, 24 L. Ed. 935.

But coming to the determining feature:

The plaintiff contends that the laying of forty or fifty miles of pipe line treated by its process was an experiment. Perhaps that is true, in the sense that the thoughtful contractor is always seeking to better his method. But it is not experimental in the sense that it can be' saved from the provisions of the law and the statute which require one to protect one’s method within two years from the time of the public use thereof.

The use began along in the middle of 1926, and the filing of Cook’s application would not save it. We must look exclusively to the Rogers application which, was filed on October 15, 1928. The joint application, of Cook and Rogers was not a continuation of the preceding separate application. The method, therefore, was in public use and on sale for two years before being protected by an application for the patent. Rev. St. § 4886; USCA title 35, p. 11, § 31.

The application upon which plaintiff’s patent was issued is a joint one made by Cook and Rogers. Cook had filed an individual application. He had made oath that he was the original and first inventor. Rev. St. § 4892; section 35, p. 272, title 35, US CA. Cook’s application was filed before the method had been, in public use two years. The Rogers application was filed after it had been in use two years.

A patent is invalid when not granted to the original and first inventor, and, if two invent, the sworn application by one of such two will not satisfy the statute. To allow one of two inventors to attempt to satisfy the precise statutory requisite would be to set aside such requisite, and to allow one, who in truth was not the inventor, to reap the monopoly afforded. Hotchkiss v. Greenwood, Fed. Cas. No. 6718, affirmed 11 How. (52 U. S.) 248, 13 L. Ed. 683; Welsbach Light Co. v. Cosmopolitan, etc., Co. (C. C.) 100 F. 648, affirmed (C. C. A.) 104 F. 83; De Laski & Thropp Tire Co. v. Wm. R. Thropp & Sons (D. C.) 218 F. 458; Ban nerman v. Sanford (C. C. A.) 99 F. 294; Smart v. Wright (C. C. A.) 227 F. 84; Ross & Co. v. Wigder (C. C. A.) 290 F. 788; Larson v. Crowther (C. C. A.) 26 F.(2d) 780; Lambert v. Hope, 50 App. D. C. 40, 267 F. 342.

The affidavit is an essential prerequisite to the exercise of jurisdietioú by the Patent Commissioner. Craig, etc., Corp. v. Static Control Co. (C. C. A.) 295 F. 72; Alden v. Dewey, Fed. Cas. No. 153; Kennedy v. Hazelton, 128 U. S. 667, 9 S. Ct. 202, 32 L. Ed. 576; U. S. Gypsum Co. v. Bestwall Mfg. Co. (D. C.) 15 F.(2d) 704; Michigan Central R. Co. v. Consolidated Car-Heating Co. (C. C. A.) 67 F. 121.

An amendment which contains new matter, and which does not merely amplify what was in the original application, must be verified by a new oath. Eagleton Manufacturing Co. v. West, B. & C. Manufacturing Co., 111 U. S. 490, 4 S. Ct. 593, 28 L. Ed. 493. But a solemn verified application by one of two inventors will not support an after-filed application by both inventors so as to make the latter an amendment of the first, and thereby tie them together. It is not .an amendment in any sense. It is wholly new matter. It is an entirely new application.

The relief asked by the plaintiff will be denied.


author: WEST, District Judge.

text:
    NEW YORK LIFE INS. CO. v. COHEN et al.
    No. 2851.
    District Court, N. D. Ohio, E. D.
    July 12, 1930.
    Garfield, Cross, McGregor, Daoust & Baldwin, of Cleveland, Ohio, for plaintiff.
    David Perris, of Cleveland, Ohio, for defendant.
   WEST, District Judge.

This is a sifit to cancel two policies insuring the defendant, Louis Cohen, against death and total disability. Application was made for the insurance on June 29, 1928, the policies were dated July 6, and were delivered on July 20. The next day Mr. Cohen became insane, and remains so. If the policies are valid, disability claims have matured for a considerable amount, for which judgment is prayed in the answer.

The written applications were attached to and became part of the policies. In them Mr. Cohen answered in the negative questions as to whether he had consulted a physician for or suffered from any ailment or disease of the brain or nervous system. These answers were untrue in fact, for the evidence discloses that on January 16, 17, and 18, 1928, he had a rather serious attack of some nervous disorder, and Hs physician, Dr. Rubin, was called in to see him. According to the doctor, Cohen appeared to be irritated, angry, and quite nervous; he freely told the doctor what the trouble was, saying that a week or so before he had met some man at a wedding; that he greatly disliked this person, and the incident had completely upset him. Dr. Rubin prescribed bromides, thinking this was all that was required. On the 18th, however, Dr. Drysdale, a skilled neurologist, was called in consultation. This physician found Mr. Cohen much depressed, restless, and sick, without physical reason to account for it — as the specialist said, it was a mental situation. However, he thought it sufficient to prescribe quieting medicines to induce sleep, and that, if that did not answer, the man should go to a sanitarium; but it does not appear clearly that Cohen was so advised. Dr. Drysdale was not called again, and Mr. Cohen seemed to make a prompt and thorough recovery. According to the evidence, he returned to his work at once and continued at his store steadily without further symptoms of trouble until July 19.

Considering his sudden seizure on July 21, since when he has unquestionably been insane, it is now easy to see that there-was a probable connection between the earlier disturbance in January and that of July. But even Dr. Drysdale, who testified for complainant, with his large experience, was not able to say definitely that this connection existed or to what extent the earlier trouble foreshadowed the later.

Following the requirements of Gen. Code, § 9391, that such answers are not defensive in an action to recover on a policy unless it be clearly proved that they were not only material, but willfully false and fraudulently made, the amended bill alleges that such was their character, and that Mr. Cohen on June 29, the date of the applications, was suffering from mental disturbance, and that he had been treated for brain and nervous trouble, as he well knew when he made his answers.

I am unable to find, and in fact do not believe, that Mr. Cohen either in January or June, 1928, thought or understood that he was suffering from any disorder of the brain or nervous system, either when Dr. Drysdale called on him or later. Certainly the proof is wholly insufficient to satisfy a court that, when he gave the answers which now turn out to be incorrect, he knew them to be false and thereby intended to deceive the insurance company. Counsel for the complainant say that the applicant also omitted to disclose the consultations with the doctors in January. But again it is not shown that this omission was willfully false or fraudulent. The evidence including the nature of Mr. Cohen’s trouble, its duration, the medical treatment he received, and the character of his recovery, does not satisfy me that the occurrences of January were in his mind at all on June 29: On the whole evidence his answers should be disregarded as immaterial. See New York Life Ins. Co. v. Wertheimer (D. C.) 272 F. 730, 734, and cases cited. The agent had difficulty in persuading Cohen to take the $5,000 policy. Defendants’ Exhibit A. For more than five months preceding his applications he worked at his store constantly, and always appeared to be in good health. On the issue of fraud I find in favor of the defendants.

The applications contained the following: “It is mutually agreed as follows: that the insurance hereby applied for shall not take effect unless and until the policy is delivered to and received by the applicant and the first premium thereon paid in full during his lifetime, and then only if the applicant has not consulted or been treated by any physician since his medieal examination.”

The proof shows that on July 19, 1928, the day previous to the delivery of the policies, Mr. Cohen consulted and was treated by Dr. Rubin for a disturbance of the stomach.

Much of the argument has been over complainant’s contention that this prevented the insurance taking effect. In the view which the court takes, it is not necessary to decide whether this was sueh a consultation and treatment as had that result, for in my opinion the policies put the insurance in effect on July 6, 1928, and the subsequent consultation and treatment did not avoid them.

The amended bill avers that the applications were attached to and made part of the policies. Together they constitute the contracts. But as to the effective date of the insurance they contain inconsistent provisions. Each application contains a direction by the applicant to date the policy as of the date it is written, together with the provisions quoted above; and in each policy the following is found: “This contract is made in consideration of the application therefor and of the payment in advance of * * *• the receipt of which is hereby acknowledged, .constituting the first premium and maintaining this policy fox* the period terminating on the sixth day of July, Nineteen Hundred and Twenty-Nine, and of a like sum on said date and every twelve calendar months thereafter during the life of the insured. * ® * This policy takes effect as of the sixth day of July, Nineteen Hundred and Twenty-Eight, which day is the anniversary of the policy. * * In witness whereof the New York Life Insurance Company has caused this contract to be signed this sixth day of July, Nineteen Hundred and Twenty-Eight” — followed by the signatures of the president and secretary.

According to the applications the insurance could not take effect until delivery of the policies and payment of the first premiums. According to the policies themselves they took effect July 6, 1928, and were to continue in force for one year at least. The provisions cannot be reconciled; one or the other controls. This would appear to be a case where the intention of the parties upon this feature of the contracts is in doubt, bringing into operation the rule that “in case of ambiguity in a life insurance policy, that construction is to be adopted which is most favorable to the insured,” as announced in Mutual Life Ins. Co. v. Hurni Co., 263 U. S. 167, 44 S. Ct. 90, 68 L. Ed. 235, 31 A. L. R. 102, and many other eases. A further rule, which seems reasonable and which the Supreme Court of Iowa applied in Goodwin v. Provident Savings Life Assurance Soc., 97 Iowa, 226, 66 N. W. 157, 32 L. R. A. 473, 59 Am. St. Rep. 411, is that, when there is a conflict between the provisions of the policy and the statements contained in the application, the former controls. In that case the application definitely excluded suicide from the risks covered, and the policy contained a two-year incontestable clause, except for fraud in obtaining the policy. It was held that suicide after two years did not prevent recovery. See, also, Anderson v. Mutual Life Ins. Co., 164 Cal. 712, 130 P. 726, Ann. Cas. 1914B, 903.

The condition of the applications that the insurance shall not take effect unless the policies be delivered, and the first premiums paid during Cohen’s lifetime, is not inconsistent with anything in the policies. It imports no time, and, so far as it was concerned, if delivery and payment were made, the insurance would go into effect at any time agreed upon by the parties.

The result above indicated would also be reached on the theory that, while the company had the right to insist upon Cohen’s stipulation in his applications respecting the earliest date the insurance would become effective, it could also- waive this provision, and did so by causing policies executed by its executive officers and containing the provisions recited above to be delivered to him, and collecting the first premiums to maintain the insurance for the period terminating July 6, 1929. It is not a question of waiver by unauthorized' delivery, or by an agent without authority; the waiver was by the president and secretary, through policies executed by them, upon delivery and collection of the premiums by a fully authorized agent.

The case of Jones v. New York life Ins. Co., 69 Utah, 172, 253 P. 200, holds that in such a ease there is no waiver — that waiver of the terms of a contract presupposes the existence of the contract.

Here it is true the company had no contract prior to delivery of these policies, but it had Cohen committed by his applications to a provision respecting the taking effect of the insurance, which was for its benefit. When it delivered and collected for policies containing provisions directly in the teeth of this feature of the applications, I cannot see how it can avoid the waiver. It js not merely that the policies were dated as they were; that signifies little, if anything. The definite express statements over the signatures of the chief officers of the company, as to when they took effect and how long the first annual premium kept them in force, are the important matters. A material feature of the applications concerned the earliest date when the insurance could become effective, and the company had full knowledge of this provision. If, as a necessary result of abandoning such features, the stipulation that consultation at any time after the medical examination and up to delivery of the policies was also abandoned in part, the company should not escape the direct consequences of such abandonment because it was not aware of the consultation. It is not a case of two independent provisions, waiver of one of which did not waive the other without knowledge as to the second. But rather a case where waiver of the primary provision — that the insurance would not become effective until delivery, etc. — by execution and delivery of policies which by their terms took effect at an earlier date, necessarily implied waiver of the incidental provision or condition precluding effective insurance, if there had been consultation and treatment at any time prior to delivery. In the Jones Case the Utah court thought that waiver must have resulted, if at all, from “the fact that the agent who delivered the policy was authorized to waive the conditions or was authorized to.enter into a'new contract of insurance.” It did not consider the effect of the execution by the company’s chief officers of a policy which by its terms could only take effect on a day prior to delivery; in fact, whether such a policy was before it does not appear — nothing being shown except the date of the policy, which did not necessarily make it inconsistent with the provisions of the application as to when it should become effective. And speaking of the application, the court said: “It is not however, as we understand appellant’s argument, seriously contended that these provisions. are not binding upon the insured.” That the terms of the policy played very little, if any, part in the decision is plain from the court’s remark after saying that there was a conflict of authority, many eases supporting the waiver, that the order under review protected the company “in the rights reserved to it in the application” and did “not deny to appellant any relief she can rightfully claim under the wording of the application and the proven facts.”

In Whipple v. Ins. Co., 222 N. Y. 39, pages 42, 43, 118 N. E. 211, 212, involving waiver of a condition precedent requiring payment of the first premium, the court says: “The application is a proposition or request for the contract of insurance between the applicant and the company, the statements of which upon its acceptance by the company bind the applicant and create correlative rights to the company. The company may relinquish or waive any of those rights. The obligations or rights of the applicant or of the company arising through the application and its acceptance cannot be restricted or affected by any provision of the policy, as a contract, until the policy has taken effect and become a contract between the parties.”

Cohen’s proposition for insurance was not accepted by the company; the policies it prepared and delivered purported to put the insurance in force at -a time different from that fixed in the applications. Complainant cannot claim that its right under the applications was not relinquished by the policies on the doctrine of the above ease, which requires them to have gone into effect in order to have that result. For when upon payment of the premiums they were finally delivered, the policies simultaneously became completed contracts effective as of their dates, and accomplished the waiver or relinquishment.

Waiver is not pleaded by defendants, but, as the suit is to cancel the policies, with the burden on complainant to show that the insurance did not take effect, and the waiver appears on the face of the bill and exhibits attached, that omission is not important.

I do not think it necessary, however, to resort to the doctrine of waiver or estoppel, as the ease really depends upon the intention of the parties as shown by the applications and policies, in connection with the averment of the bill that the latter were delivered and paid for.

Johnson v. Am. Cent. Life Ins. Co., 212 Mo. App. 290, 249 S. W. 115, was a ease where the policy seems not to have provided when the insurance should commence or end,. but fixed the date of premium payments. The application stated that each insurance year would end on November 16, and that there would be no contract until' delivery of the policy and payment of the premium. A binding receipt stated the insurance would be in force from date of approval of the application by the medical examiner. Holding that the provision of the application that insurance should end on November 16 did not control as to when it was to begin, to the exclusion of other provisions of the contract, the court regarded the time fixed for beginning as at least ambiguous, and construed the contract effective at the date of the delivery of the policy and payment of the premium, on December 18, that being the construction most favorable to the insured.

I think that for like reasons this insurance must be construed as taking offect, in the language of the policies, “as of the sixth day of July, Nineteen Hundred and Twenty-Eight.”

In New York Life Ins. Co. v. Horton, 9 F.(2d) 320 (5 C. C. A.) the agent had no authority to deliver the policy under the circumstances of the illness of the insured, and the ease turned on this. No such issue is made here; no want of authority on the part of the agent is alleged.

New York Life Ins. Co. v. Gay, 36 F. (2d) 634 (6 C. C. A.) did not involve the questions iiow presented. The application dated March 13, 1923, contained a condition similar to the one here as to when the insurance should become effective, but with an obscure provision added, relating to dating the insurance back to take effect as of the date of the application. Possibly because of that the insured and not the company seems to have relied upon the condition, hoping, I suppose, to establish that the policy was in effect on March 13 and six days before the consultation and treatment. The court held, however, that, aside from any stipulations in the condition, the applicant, who before March 20, the date of' the policy, as well as before its delivery on April 29, had consulted physicians for cancer of the stomach requiring immediate treatment, was guilty of such fraud in fading to dis-. close this fact, as to invalidate the policy.

Coming now to the determinative question : How is the language, “and then only if the applicant has not consulted or been treated by any physician since his medical examination,” to be construed? That it must be construed is certain. Execution and delivery by complainant of policies, which, as the eourt now finds, put the insurance in effect on July 6, make it impossible to give the words the meaning intended when the applications were signed. They express a condition precedent to the effectiveness of any insurance. Consequently they cannot be allowed to refer to something occurring after the insurance became effective. The company could have no legitimate concern with such subsequent event, unless it was fraudulent. The words cannot be construed as a condition subsequent, invalidating the contract of July 6, on July 19, the date of the consultation, for that too would violate their plain purpose.

The parties agreed that, if consultation and treatment occurred within a certain period after the medical examination, the insurance would not take effect. What is the period? To what date does the language, “has not consulted or been treated,” refer? I think that a reasonable construction which gives effect to all the words used will refer this language to the effective date of the insurance as fixed by the policies. And that the conditions in Mr. Cohen’s applications must he held to mean that, if policies were delivered by the company and the first premiums paid by the applicant in his lifetime, the insurance would take effect according to the terms of the policies, and then, i. e., in that event, only upon the further condition that the applicant had not, before the time they were made effective and after his medical examination, consulted or been treated by any physician.

Another construction suggests itself, that the condition should be held to mean that the contracts of insurance would not come into existence unless and until the policies were delivered, etc. As there is a distinction between an insurance contract coming into existence, and the taking effect of the insurance provided for in the contract, there is no warrant to hold they mean the same thing; and such construction is not permissible.

The consultation with Dr. Rubin occurred on July 19, thirteen days after the insurance took effect, and did not come within the condition as above construed, even though it took place before delivery and payment.

Had Mr. Cohen’s illness of July 19 been of a character to indicate serious impairment of mental or physical health, it would be necessary to decide whether it was a fraud upon the company for him to accept the policies after the date upon which the insurance was made to take effect, without full disclosure. That would be a different question than was present in the Gay Case, where consultation occurred before the date of the policy, and presumptively before the insurance became effective. But as Cohen’s disorder, according to the evidence, was nothing but a gastric attack, an upset storm ach, with the usual accompaniments of nausea, belching, and vomiting, it was not a fraud to omit to disclose it, regardless of when it took place.

The amended bill will be dismissed, and a decree awarded Rose Cohen on her cross-bill.