text:
    KLOSE v. UNITED STATES. LORENZ v. SAME. STACK v. SAME.
    Nos. 8884, 8888, 8890.
    Circuit Court of Appeals, Eighth Circuit.
    March 21, 1931.
    Rehearing Denied April 24, 1931.

      E. J. Brennan, of St. Louis, Mo., for appellant Klose.
    William E. G. Watson and J. A. Mansfield, both of Minneapolis, Minn., for appellant Lorenz.
    Lewis L. Drill, U. S. Atty., of St. Paul, Minn., and Lafayette French, Jr., Sp. Asst, to U. S. Atty., of Austin, Minn., for the United States.
    Before STONE and GARDNER, Circuit Judges, and WOODROUGH, District Judge.
   GARDNER, Circuit Judge.

Appellants will be designated herein as defendants. They were jointly indicted with certain others, for violations of sections 215 and 37 of the Criminal Code, 18 USCA §§ 338 and 88, in an indictment containing twenty-three counts. They, with other named defendants, were charged with having devised a scheme to obtain money and property by false pretenses in connection with the sale of stocks, bonds, and notes of the Yolkszeitung Printing & Publishing Company, the Hardstone Brick Company of Duluth, Inc., and the Hardstone Brick Company of Little Falls, Inc., and that in carrying out such scheme the mails of the United States were used. The indictment is not challenged by either of the defendants, and it is stipulated in the record that, for the purpose of the appeals, it is admitted that the evidence was sufficient to prove beyond a reasonable doubt the device of a scheme to obtain money by false and fraudulent pretenses, as alleged in the indictment. While the defendants were tried together, each has prosecuted a separate appeal. The appeal perfected by the defendant William R. Stack was not followed by the filing of any brief, nor the presentation of any oral argument in this court and is deemed abandoned, and for that reason it is dismissed and will be given no further consideration. The defendant Klose, on his appeal, urges that: (1) It was error to deny his motion for change of judges; (2) that it was error to deny his motion for a mistrial, because of the prejudicial remarks of the-assistant United States attorney and of misconduct of third persons with reference to the jury; (3) that the evidence is insufficient to establish beyond a reasonable doubt that he knew, or had reason to believe, that a scheme to defraud had been devised or that he participated in the furtherance of such scheme; (4) that the verdict was the result of passion and prejudice. The defendant Lorenz urges only error in the denial of his motion for a mistrial.

The indictment here involved is the same as that referred to in the opinion of the court in Cochran v. United States (C. C. A.) 41 F.(2d) 193. These defendants were not then tried, for reasons which are not clearly disclosed by the record. The defendant Lorenz was one of those who the government claims originally devised the scheme to obtain money by false pretenses, while the defendant Klose was a salesman who, it is claimed, with knowledge of the scheme, made or participated in the making; of representations in the sales of stocks, bonds, and notes in furtherance of the scheme to obtain money by means of false and fraudulent representations. It having been stipulated in this ease that the evidence satisfactorily established the fact that the defendants Cochran and Lorenz had devised a fraudulent scheme to obtain money by false pretenses, as charged in the indictment, it will not be necessary to review the evidence as to that issue, further than to say that it was substantially the "same as that reviewed by this court in Cochran v. United States, supra, and the history of the case is there sufficiently set out.

The defendant Klose assign's error in denying his motion for a change of judges. This motion, not having been filed until the day the trial opened, was not timely presented, nor was it sustained by any affidavit showing facts or reasons for the belief expressed that the trial judge was biased or prejudiced; neither was it supported by a certificate of counsel that the application was made in good faith. Under the authorities the application was, therefore, fatally defective. Ex parte N. K. Fairbank Co. (D. C.) 194 F. 978; Henry v. Speer (C. C. A.) 201 F. 869; Berger v. United States, 255 U. S. 22, 41 S. Ct. 230, 65 L. Ed. 481; Lewis v. United States (C. C. A.) 14 F.(2d) 369; Nations v. United States (C. C. A.) 14 F. (2d) 507; Lipscomb v. United States (C. C. A.) 33 F.(2d) 33; Cuddy v. Otis (C. C. A.) 33 F.(2d) 577; Rossi v. United States (C. C. A.) 16 F.(2d) 712.

Toward the end of the trial in this case, which consumed some six or seven weeks, in the course of the direct examination of a witness for the defense, the following incident occurred: Paul Olson, a witness called on behalf of the defendants, was interrogated as follows:

■ “By Mr. Quinn (appearing for defendant Klose):
“My name is Paul Olson. I live in Minneapolis at 4510 Arden Avenue, South. My business is real estate. I was one of the defendants here in this indictment who was tried at a former trial.
“Q. Then was found not guilty by that jury?
“Mr. Anderson: I object to that as incompetent unless you want to show there were'ten found guilty.
“The Court: It may be- stricken. -
“Mr. Watson: As to the defendant Lorenz I object to the remark.
“The Gourt: Both of the remarks may be stricken as to what happened in the former trial.
“Mr. Watson: It reflects on the credibility of the witness.
“The Court: There is no presumption of guilt.
“Mr. Quinn: I will withdraw the question and not urge it further if the court thinks it improper.
“Mr. Watson: I wish the record to show as to the defendant Lorenz, we ask the court to give more specific instructions as to the remark of Mr. Anderson regarding the guilt or innocence of the other defendants — regarding the prejudice of that remark on the defendant Lorenz.
“The Court: You may have an exception. The court does not wish to give any further instructions at this time.”

In its charge to the jury, the .court instructed as follows: “The only defendants here on trial are Arthur Lorenz, William R. Stack, and O. W. Klose and the only question before you is the question of the- guilt or innocence of each of these defendants of the crimes charged. You have no concern with what has happened to the other defendants in this case. If any of you happen to know or think you know, the results of the former trial, you are to put those matters entirely out of your minds for they have nothing whatever to do with this case. Nor has the fact that any defendant pleaded guilty at the commencement of this trial any bearing on the issues in this ease, and it must not be considered or discussed by you in reaching a verdict.”

No exception was taken to these instructions, nor were any additional or other 'instructions requested on this subject. The defendant Lorenz does not urge this as error, but it is urged on behalf of the defendant Klose. As to him, it is observed that his counsel withdrew the question, took no exception, and said he would not urge the matter further. It is also to be observed that this was not assigned as error by counsel who tried the case, but was brought into the record on motion of the present counsel for the defendant Klose, on motion for leave to file in this court additional assignments of error. It is therefore doubtful whether the matter is preserved in the record or properly before . this court; It was the defendant Klose. who brought out the fact that the witness had been tried under this indictment at a former trial. -This, as counsel must have known, was not material. Having himself brought the matter out, he then sought to show that the witness had been acquitted. It is argued that this defendant was entitled to have his witness rehabilitated. If he had been in any manner discredited, it was the defendant Klose who did so, and apparently the only purpose of so doing was to enable him to get before the jury the fact that others indicted and tried on the charges involved had been acquitted. As the suggestion made by the assistant United States district attorney was to the effect that others had been convicted, it is difficult to see how this could possibly have been prejudicial; in faet, it would seem rather to have tended to rehabilitate the witness than otherwise. In any event, the defendant Klose, having himself brought this matter into the record, is not in position to allege error. There was no secret about the proceedings that had been had in this rather notorious case. The first trial had lasted some seven weeks. It was tried in a metropolitan city publishing many newspapers, and it involved a large number of defendants. The result of the first trial was a matter of public record, and it was a matter of common knowledge. It is not perceived how it could' possibly have injured this defendant that the jury should have known that certain other defendants had been found guilty; in fact, the defendant Klose does not contend in this court that others were not guilty of the offense, but contends only that he was without guilty knowledge and that he acted in good faith. As was said by this court in Stewart v. United States, 211 F. 41, 48: “Under such circumstances, we do not think the court would be justified in holding that the fact disclosed by the District Attorney, presumptively already known to the jury, although involving a grave impropriety, was such as to necessarily work prejudicial harm to the defendant’s cause.”

As before observed, the matter sought to be elicited by counsel for defendant was not a material nor an issuable fact. If.it had been, then proof might have been submitted as to how many of the defendants had been acquitted on the other trial, and if that were material, then, confessedly, the government should have been permitted to prove how many had been convicted, so that there was some provocation for the remark of the assistant United States district attorney, and it was apparently not prompted by sinister motives. The trial in the instant case was a long one, and the rights of the defendants seem to have been carefully guarded by the trial court, both in its action in-striking the remarks and in instructing the jury with reference thereto. The incident, though regrettable, did not constitute reversible error. Goodwin v. United States (C. C. A.) 200 P. 121; Robbins v. United States (C. C. A.) 229 P. 987; Myers v. United States (C. C. A.) 223 P. 919; Echikovitz v. United States (C. C. A.) 25 F.(2d) 864; Pollock v. United States (C. C. A.) 35 F.(2d) 174.

It is urged on behalf of both the defendants Klose and Lorenz that they were prevented from having a fair and impartial trial by reason of certain irregularities in connection with one of the jurors. During the trial, the jurors were kept in the custody of the United States marshal, but at the close of the testimony, certain of the jurors, including one Denzer, were taken into a barber shop in St. Paul about 6 o’clock on the afternoon of December 15, 1928. This juror was attended by a barber named Roston, who attempted to engage him in a conversation with reference to the trial. It is the claim of the defendants that during the time Roston was cutting the juror’s hair, it was agreed that the barber would approach the defendants and submit to them a proposition whereby, in consideration of a sum of money to be paid by defendants, the juror would vote and hold out for an acquittal. Following this alleged conversation, the barber communicated with the defendant Klose and offered to make arrangements by which, through him, a sum of money should be paid for the purpose of influencing the juror. The United States district attorney in charge of the prosecution and the trial judge were notified by counsel for the defendants. Thereafter, pursuant to the direction of the court, one of the attorneys for the defendants accompanied by an operative of the United States Department of Justice, sought to test the truthfulness of the story told by the barber, by offering the wife of the juror $150, the barber having claimed that he had arranged with the juror to pay the juror’s wife, and that she would come into the courtroom and give the juror the “sign,” or otherwise communicate with him, showing that arrangements had been made. The juror’s wife, however, refused to accept the money, but instead the following day called upon the trial judge and told him what had occurred. She was then advised by the court that the offer had been made to her under the order of the court. In the meantime, the juror was taken seriously ill, as conclusively shown by the testimony or certificates of three physicians, and he was removed to a hospital. The wife asked permission to visit her husband at the hospital, which request, no objection having been interposed by counsel for the defendants, although personally present, the court granted with the admonition that absolutely nothing be said by her to her husband with reference to this incident, and with the promise on her part that nothing would be said about the matter. We must assume, especially in view of her conduct in connection with this incident, that she was of such character as to warrant the court in trusting her to obey this admonition, and there is nothing to indicate that it was violated. It thus appears that diligent efforts were made to expose any misconduct on the part of the juror, but no corroboration of the barber’s story was had. The barber called upon the judge who presided at the trial, and the judge states: “I haven’t the slightest doubt in my own mind as to the honesty of this juror (Denzer), who has been mentioned in the newspapers. Furthermore * * * I was called up by Roston, who asked permission to come out and see me at my house. I told him to come up. He came up and sat down and told me that so far as this juror having discussed this case with him, there was absolutely no truth in it whatever; that all that transpired was this: Mr. Denzer sat down in this barber’s chair, and that he was told by him, by the juror, that he lived near Rosemount; that he was a farmer; that he was on the jury; and Mr. Roston says that he had had some difficulty himself in a criminal charge, and he said he had sympathy for those that were in the situation that the defendants were in this case, and that the juror said that probably was true, or words to that effect, but that he could not discuss the case, and that that was all that transpired. * * * I am absolutely satisfied that there was no conversation between this man and the juror whatever with regard to this ease. Nothing of a prejudicial character happened, and I see no use of presuming, or no occasion to presume that anything prejudicial could have resulted from anything that transpired in connection with the ease. * * * Of course, all that was said was purely hearsay. * * * I have given the matter a great deal of consideration, and I am satisfied in my own mind that if any prejudice could be shown that it would be a mattep which could be better taken care of upon a motion for a new trial and an opportunity for investigation than it could be otherwise.”

As remarked by the trial judge, the entire showing was based upon hearsay. Roston, the barber, communicated with Klose, Klose communicated with counsel for defendants, and counsel alone made affidavit. So far as the showing purported to reflect anything the juror is alleged to have said, it was hearsay upon hearsay. On the other hand, it appears from the record that the trial judge interrogated Roston personally and got from him first-hand what he had to say about the incident. It is not claimed that the misconduct was the result of any corrupt or improper influence practiced on the part of the government, nor that any one connected with the trial of the case was in any degree responsible for the unfortunate incident or guilty of any reprehensible conduct with reference thereto. Courts should not and will not tolerate any attempt to tamper with juries, and where the misconduct of a juror has been participated in by the prevailing party, it should be presumed that prejudice resulted from the misconduct, but where, as in this ease, it clearly appears that the prevailing party did not participate in nor have any knowledge of the alleged misconduct, then the question confronting the trial court was whether or not the facts would warrant a finding of prejudice. Whether this juror had been guilty of misconduct, or had been subjected to improper influences affeeting his verdict, was a fact to be determined by the trial judge. The trial judge concluded that the juror was blameless, that he had refused to discuss the ease with the barber, and that the barber was merely attempting to create a situation where he might blackmail the defense. It is the duty of the trial judge to ■ maintain the integrity of trials by jury, and if it appears at any stage of the trial before verdict that misconduct of any juror or other person has tainted the panel with any sort of corruption, or intimidation, or coercion, the trial should be stopped and a mistrial granted. United States v. Russell, 255 U. S. 138, 41 S. Ct. 260, 65 L. Ed. 553; Mattox v. United States, 146 U. S. 140, 13 S. Ct. 50, 36 L. Ed. 917; Sunderland v. United States (C. C. A.) 19 F.(2d) 202. Yet, it does not follow that a mistrial should be granted whenever any evilly disposed person in no way connected with the parties, attempts to make improper remarks or advances to a juror, or attempts to corrupt a juror. Such a rule might preclude bringing any desperate offender to justice. Without any expectation or hope of success in such an attempt, it might readily be resorted to as a means of thwarting the aáministration of justice. There was no abuse of discretion by the trial court in denying a mistrial, and no prejudice has been shown by reason of this alleged misconduct and irregularity.

It is further contended that the defendants were prejudiced because of the great publicity given in the newspapers relative to the alleged jury tampering. There is nothing in the record to show that any of the jurors read either of the papers containing the objectionable articles, and such publicity, as the incident received was apparently due to the acts of the defendants or their counsel. It is not observed that the objectionable publicity contained any misstatements or false charges, nor did it contain anything calculated to intimidate jurors or obstruct justice. At the beginning of the trial, the court cautioned the jury not to read any newspaper articles concerning the trial, and there is no evidence that the jury violated this admonition. In addition to this, the court, after the publication of the objectionable articles, further admonished the jury as follows: “You recall, gentlemen, that at the commencement of this trial I requested you to refrain from reading articles in the newspapers referring to this ease.. During any long trial such as this is, it frequently happens that there are remarks made, gossip, and sometimes accusations made by persons, who are not interested in the ease, which it is believed may have some tendency to cause prejudice or feeling, and it frequently happens that those matters get into the newspapers. I have done all that I felt was reasonably possible to protect you gentlemen from any possible influence. I regret to state that there have been published recently in some of the papers, articles referring to the ease, which if not properly understood might cause some difficulty. I hope that none of you have read those articles, but if any of you have, I want to tell you now not to discuss them with the other jurors, not to consider them in any way, and to entirely disregard and put them out of your mind. I will say to you that there is nothing which has transpired during the trial of this case which would justify any conclusion that anything wrong or improper has been done by any of the defendants or their counsel, or by any of the government officers or employees-or by the attorneys for the government; and I can further state to you without any qualification whatsoever that there is nothing which has occurred which has reflected in any way upon the honesty and integrity of any of the. jurors in this ease.”

The matter is again referred to in the court’s instructions by which the jury were directly'instructed to disregard the newspaper articles, if any of them had read them. It should be observed in passing that the motion for mistrial did not include the elaim of prejudice because of the publicity given this incident; but quite aside from this fact, we are of the view that there is no foundation for the claim that prejudice resulted therefrom. Stunz v. United States (C. C. A.) 27 F.(2d) 575; Myers v. United States (C. C. A.) 223 F. 919; Itow v. United States (C. C. A.) 223 F. 25; State v. Morris, 58 Or. 397, 114 P. 476.

There remains for consideration the question of the sufficiency of the evidence which is raised only by the defendant Klose. This question is limited to the inquiry: (1) Did the defendant Klose know of the scheme to defraud, and (2) did he aid in any substantial way in its execution? In instructions which are not challenged on this appeal, the court charged the jury that: “The gist of the offense, that is an essential element of it, is the prosecution of a fraudulent purpose, toward the execution or fulfillment whereof the mail is used. One man may form and accomplish it, with or without assistance, but all who with criminal intent join themselves even slightly to the principal schemer are subject to the statute, although they may know only their own share in the aggregate wrongdoing. The law is that ‘whoever directly commits any act constituting an offense defined in any law of the United States, or aids, abets, counsels, commands, induces or procures its commission, is a principal.’ So that whoever knowingly aids, abets, counsels, commands, induces or procures the doing of any act constituting a violation of the statute in question is just as guilty as the principal schemer.”

Again the court said in its instructions: “Any defendant who knew that the enterprise was one for obtaining money or property by false and fraudulent pretenses, representations or promises, and who aided in any substantial way in the execution of it — that is, helped in any way to carry it on — is guilty if the letters set out in the indictment, or some of them, were mailed in execution of it by one of his associates in the unlawful scheme. So you must ask yourselves this question as. to each defendant: Did he become a participant in this scheme; did he aid in devising it or in its execution, knowing its character?”

Again the court said: “Where two or more persons jointly devise and execute a scheme to defraud by the use of the mails, they may thereby become in effect partners in the criminal purpose. If they do, the aets of each thereafter during the existence and execution of the seheme, done in furtherance of that execution, may become the acts of all the partners, and each may be convicted of the mailing of a letter which one of his partners caused to be mailed.”

By these and other instructions it was made clear to the jury that to warrant a conviction of any defendant, it must appear to their satisfaction beyond a reasonable doubt, not only that a fraudulent scheme had been devised, and that the mails had been used in connection with its execution, but that the defendants were criminally connected with it, either as principal, or aiders and abetters. While the stipulation relieves us of the necessity of reviewing the evidence, which it is admitted, satisfactorily establishes the formation of a fraudulent scheme to obtain money by false pretenses, it is, nevertheless, important to have in mind the character of the fraudulent scheme and the various methods employed in its execution, because the evidence going to prove these facts is of sueh a character as to mark the enterprise as unusual and such as not only to give notice to any right-thinking person that the enterprise was ■not a legitimate one, but to shock the sensibilities of any business man entertaining ordinary ethical standards of business.

It appears from the evidence that the defendant Klose was in constant communication with the promotion headquarters of the Volkszeitung Printing & Publishing Company, and that there issued from that office, letters and advertising matter similar to that referred to in our opinion in Cochran v. United States, supra. He received, directly or indirectly, from the moving spirit, Cochran, the instructions and rules which should govern the activities of the salesmen, and these themselves were of such a character as to mark the enterprise as inherently fraudulent. Cochran instructed his salesmen to go out and get the money; that it didn’t make any difference how they got it, and that “he would take care of the squawks.” These salesmen knew that they were all working under and pursuant to a promotion seheme. The projects promoted were not such as are ordinarily owned or operated by a printing and publishing company, but were entirely foreign to the ordinary activities of any such company, and it was apparent that the paramount activity and business of the Volkszeitung Printing & Publishing Company was not the operation of any legitimate business, but that it was promoting the sale of various securities. Among its advertising matter were some beautifully lithographed circulars, relating to the two apartment houses which, with the Volkszeitung building, constituted a large part of its physical properties. These properties were old structures, built in 1886 and 1888, were mortgaged for $275,000, which was more than they were worth, and yet there was placed on sale these gold notes of the company aggregating in amount $1,000,000; and in these circulars these apartments, the Alexandria and the Piedmont, were stated to be valued at $308,621 and $357,760, the net annual income'was stated to be-$33,024.13 and $44,256, respectively, while the testimony indicated that for the years 1926 and 1927 these properties had been operated at a net loss.

Prior to the date of the offenses charged in the indictment, Klose had operated in Wisconsin, and he knew that the sales made by him and his associates were disapproved by the Wisconsin Securities Commission, not only because they were made without authorization, but because of the character of these securities, as it appears that the Wisconsin Commission required that the money received for these securities be refunded to the Wisconsin investors. His contract with this concern was itself a badge of fraud. By its terms, he was advised that Cochran was selling gold notes of the Volkszeitung Company which matured in twelve months and bore interest at seven per cent. Out of the proceeds, Klose was to receive ten per cent., and in the event that he sold $60,000 in six months, he was to receive an additional bonus of $5,000. On this basis, the net cost to the Volkszeitung for obtaining the use of $60,000 for one year would be $15,200, made up of $4,200 interest, $6,000 commission, and $5,000 bonus, or 25 per cent, every twelve months, and in addition to this, Cochran was entitled to a commission of 5 per cent., although Klose may not have known this. A man of sueh intelligence as Klose must have known that no legitimate business could pay any sueh premium for funds, nor would any legitimate business have been required to pay such a premium for working capital. He said to the witness Pollman that he did not know what Cochran was doing with the money, and he expressed doubt whether the concern would survive twelve months:

These gold notes were being so issued as to evade the Minnesota Securities Act Law (Minn. St. 1927, § 3996-1 et seq.). The Security Commission having stopped the sale of bonds and having refused to issue permit for the sale of these securities, it was found that the commission did not have jurisdiction' of securities which matured in less than two years. Thereupon this concern issued notes payable in eighteen months. The law was then so changed as to give the commission jurisdiction of the sale of securities maturing in fifteen months, and thereupon the form of the notes was again changed so as to be payable in twelve months. In fact, the entire proceedings of this outlaw organization smacked of corruption.

With the acquisition of the Volkszeitung publication and the Stats Tidning publication, Cochran -and his associates had access to the subscription lists, that of the Volkszeitung being made up largely of Germans, and that of the Stats Tidning being made up of Scandinavians, and it was known to these salesmen that the German subscribers were being sent letters and printed circulars in the German language, recommending these securities, because of the Germans’ confidence in the Volkszeithng which had been published for many years. Other devices were employed to prey upon the credulity of the subscribers to the Stats Tidning, by representing a proposed enlargement of the field of activity and influence of that publication. These lists were made up very largely of aged, thrifty people, whose credulity was subtly preyed upon through various devices and falsities resorted to by high-pressure salesmen, among whom Klose seems to have been one of the most artistic 'and successful. Among the printed matter sent out to these subscribers are found the following expressions: “The Volkszeitung existing for over forty years, is one of the most flourishing enterprises in the entire state. More than two hundred thousand copies of our paper leave our large presses every week. In addition to our known place of business we have acquired during the last few years the Piedmont Hotel and the Alexandria Apartment. The valuation of the Piedmont is estimated at $357,000 and the Alexandria at $308,000. * * * Please do not let this opportunity pass by but invest your money in first class security and at a high rate of interest. Your own interest should cause you to invest your money where it is insured against loss and where you don’t have to be satisfied with three or four per cent. Absolute safety— seven per cent.”

In another circular, printed in the German language, appears the following: “As we have been in business over fifty years and enjoy the best reputation of the entire state, it is self-evident that we are careful to recommend to our readers only such investments which exclude all loss. This is particularly true of our gold notes which are insured through valuable real estate in the best parts of St. Paul. Recently we sent you some printed matter describing the real estate and the business enterprises which are controlled by the Volkszeitung and which are turning in such good returns that it is possible for us to give our readers seven per cent, interest, which is a high rate of interest under present conditions. Absolute safety and good interest will also be our business principle in the future in our intercourse with those of our readers who have invested money with us.”

Prom another of these circulars, we quote the following: “You and your wife may depend upon it that we will not recommend an investment to you through which our German readers would lose their money. Everyone of our readers is in a similar position, having saved a few thousand dollars through a life time of hard work and we do not wish toi burden our German conscience and be responsible for the loss of the few cents they have saved up for their old age.”

The salesmen knew that they were soliciting the subscribers to these foreign language papers; they knew of the cooperation they were receiving from the entire organization, the only purpose of which was to sell to a confiding constituency of these newspapers these various worthless securities. The witness Pollman, who was associated with Klose, says: “The system followed there in the office was if a team had a good prospect and they could not close him, I was told to go to Mr. Lorenz and to ask him to write a letter in German to our prospect, and give him the facts, and he would do so, and then, if necessary, to ask him to accompany me to this particular prospect, to try to close him, with him present. Mr. Cochran told me this. I consulted with Mr. Lorenz, and asked him to write letters for me. He did so on one or two occasions. I would give Mr. Lorenz the information; the name and address of the prospect; the amount of money, where he had it, and how he had it, and if possible, to close the deal for a certain amount of it, or all, if we could get it all, and then, after Mr. Lorenz had written these letters, I would again go out to call on the prospect.”

Pollman also testified that on numerous occasions he had discussed with Klose the statement of Cochran that they were to go out and get the money in any way they saw fit, and that he (Cochran) would take care of the “squawks.”

Before passing to the representations made by Klose, it is observed that he stated to his associate Pollman that he wanted to stay long enough to get $10,000, and then he was , quitting and getting out of it; that he did not know what Cochran was doing with the money. With this wholly inadequate presentation of the background, we turn to some of the representations made by Kllose. In practically every instance he represented that an investment in these gold notes was absolutely safe. He also represented that they were amply secured; that the company was making 170 per cent.; that these notes were a lien on the company’s property, including the apartment houses, lithographic pictures of which were shown, no disclosure being made that these properties were already bonded for $275,000; that the company was borrowing only $30,000, without disclosing that it had already issued bonds for $275,000 and was issuing gold notes in the aggregate amount' of $1,000,000; that the company and its various properties, including its brick factories, hotels, and apartment houses, were all making big money; that the company “was awful rich”; that an investment in these gold notes was one of the safest investments that could be made, much safer than the Northern States Power bonds, and that if one invested in his company he would not have to worry about its being safe, and that it would be wise to transfer Northern States Power bonds for these gold notes; that there was plenty of security baek of them. One of the victims testified with reference to her purchase, among other things, as follows: “They (Klose and his associate) said they did not need the money.; they could get it elsewhere, but they wanted to give the subscribers a chance, and they would not renew- the note after it once came due; it would not be renewed, but I would get my money back. He said only the old subscribers to .the Stats Tidning could invest. They don’t want anybody else’s money. He said it is perfectly safe; the Volkszeitung Printing and Publishing Company was a perfectly safe company.”

In practically every instance Klose assured the prospective purchaser that the investment was perfectly safe and amply se>eured. A German widow lady testified as to her conversation with Klose, resulting in her purchase of some of these notes, as follows: “Of course, when he told me, then I thought it was pretty good, if I got my thousand dollars back, and I said, ‘Ves, I would do that,’ and finally I said to him, ‘Don’t take this money from me if it ain’t safe; that is all I got; it is my husband’s insurance money,’ I told them. He- says, ‘Oh, it is safe; you don’t need to worry about that; I got an old mother, and I would not do a thing like that.’ And he says, ‘I don’t need to worry; it was as safe as anything in the' world, that money, and I get it back in a year.’ * * 4 I asked him, I says, ‘Can you swear that this money is safe?’ He says, ‘I will swear to it, by the life of my boy, that the money is safe,’ and I finally did give him the papers, and I says, ‘Leave this money until I get my interest on it next month, the 20th of July.’ He says, ‘No, I will give you the interest,’ and he made out a cheek, and he made out a gold note for me for the whole amount of money the same day.”

The surviving widow of a minister of the Swedish Lutheran Church was induced by Klose to invest in these gold notes. She had money invested in the preferred stock of the Northern States Power Company, and Klose advised her that the stock was not worth more than 30 cents on the dollar. She testified, among other things, as follows: “He took out his wallet, and showed me these pictures of the Piedmont and the Alexandria. He said that they had invested their money there, and he showed me those big apartments, and those big buildings, and told me all about them. Mr. Klose said they were making forty per cent, on this investment in those buildings. * * * I told Mr. Klose that I was a widow, and that I was working hard for my living, and so I said, ‘I did not want to invest anything unless I know that it is safe.’ He said, ‘Well, I am a widower, and I have two boys,’ and he knew what it was to be left that way. And then he showed me pictures of his boys, and he seemed to be very kind and sympathetic. 6 * * He said about how safe it was, that it was much safer in this company than in anything else.”

An old gentleman seventy years of age, of Swedish extraction, who had been a subscriber to the Stats Tidning for forty years, at the solicitation of Klose invested $7,000 in these gold notes. He was told that the Volkszeitung Printing & Publishing Company had been printing the Stats Tidning for twenty years; that they had bought it and were planning to start an English paper, and for that reason needed money to buy additional printing presses and other printing equipment-, and they had decided to give the' subscribers of the Stats Tidning a chance to make a safe and profitable investment of their money, and that they would not accept any funds from anybody other than the subscribers of the Stats Tidning. This witness, among other things, testified: “And in the conversation he represented that that investment would be very safe and profitable, bearing seven per cent, interest, payable quarterly, and there was nothing safer. * * * When I made my first investment, Mr. Klose said that I could get it back any time I wanted it, and other times he said I could get it back any time I needed it. And he also said, ‘If you need money, don’t hesitate to let us know. All you have to do is to write down to the office and your money will be forthcoming. * * * ’ He said about the same thing every time he was there, how safe it was, and how it was secured by valuable St. Paul real estate, and he made reference to this building, the Alexandria building, the Piedmont building, and the Volkszeitung building and equipment. * * * I also asked him about the success of the business in general, and he said, ‘The business is growing fine.’ He says, ‘The Volkszeitung Printing and Publishing Company are doing a fine business, and they are successful and making good money,’ and that was what led me to make this additional investment.”

The foregoing are simply typical of the representations made. The sales talks employed by Klose were enriched by most extravagant and wholly false statements which may not have gone directly to the issues, but indicate a reckless disregard for the truth and a determination to follow the advice of the master mind directing this fraudulent scheme, to “get the money anyway you can.” Other faithful Swedish subscribers to the Stats Tidning were told of the proposed and wholly mythical plan of developing that publication and of employing an eminent educator widely known to the subscribers of the papers, as its editor, and to the German subscribers he told equally seductive stories, appealing to their sentiment or clannishness. He did not take the witness stand, but his counsel claim in his behalf that he acted in good faith and that he had made a careful investigation of the financial affairs of the Volkszeitung and relied thereon. We are not impressed with the suggestion that he could possibly have acted in good faith. He said so many false, extravagant, and unwarranted things aside from those claimed in the indictment, that it is difficult to clothe him with a mantle of good faith. His remarks to Poll-man contradict any such contention, and his entire conduct smacks of fraud and corruption. ' The evidence with reference to his so-called investigation of the affairs of the Volkszeitung shows that he was told that there was an issue of bonds of $275,000. The witness said: “I explained to him that the note holders would come in after the bond holders, that is, what was left after the $275,-000 worth of bonds had been satisfied. I said that the profits from the First Investment Company were to come in there. He did not ask me if I had received any profits from the First Investment Company. Then 1 told him the profits from the sale of brick machinery. He did not ask me about the amount of gold notes that had been sold up to June, 1926, nor what the money that he was bringing in for the sale of gold notes was being used for, but he understood that.”

Concerning the so-called financial statement given to Klose, and which his counsel greatly stress, the secretary-treasurer of the company testified that she did not know who made it, and that she did not furnish it to Klose as being a statement of the condition of the Volkszeitung. It is observed that Klose was specifically told that the note holders came after the bond holders, “That is, what is left after the $275,000' worth of bonds had been satisfied.” Had he been seriously attempting to ascertain the financial condition of this company, he should have inquired as to the amount of profits being earned, the amount of gold notes being sold, and the purpose for which the money was being used. There was $275,000 worth of bonds outstanding against the properties of this company, yet in all his representations he either directly represented, or left his victim to infer, that the property of the company was all free from incumbrances, and that these notes were a first lien thereon. We think substantial evidence abundantly proves that Klose participated .in this gigantic fraud, and that he was one of Cochran’s most efficient lieutenants and co-workers. To permit these shocking frauds, leaving wrecked fortunes of numberless honest and confiding people in their devastating pathway, to go unpunished, on the flimsy excuses urged in behalf of these defendants, would be a travesty on justice and place a premium on artistic villainy and rascality.

The judgments are therefore affirmed.


source: Caselaw Access Project

author: EVANS, Circuit Judge.

license: Public Domain

text:
    JOHNSON BROS. ENGINEERING CORPORATION et al. v. MASTERS.
    No. 4348.
    Circuit Court of Appeals, Seventh Circuit.
    March 11, 1931.
    Rehearing Denied May 28, 1931.
    Cheever, Cox & Moore, of Chicago, Ill. (Howard M. Cox, Geo. L. Wilkinson, Ballard Moore, and A. C. Paul, all of Chicago, Ill., of counsel), for appellants.
    Rector, Hibben, Davis & Maeauley, of Chicago, Ill. (Prank Parker Davis, of Chicago, Ill., S. L. Wheeler, of Milwaukee, Wis., and Harry W. Lindsey, Jr., of Chicago, Ill., of counsel), for appellee.
    Before ALSCHULER, EVANS, and ANDERSON, Circuit Judges.
   EVANS, Circuit Judge.

Presented for determination on this appeal are questions involving the validity and infringement of three patents. They all relate to outboard motors. Two of them were issued to Carl H. Hult and Osear W. Hult, Nos. 1,207,761 and 1,166,523. The first enumerated is known as the “A” patent, the latter as the “B” patent. A third patent, No. 1,467,641, to L. J. Johnson also deals with an “outboard motor.” The first-named' appellant owns the patents, while the Johnson Motor Company is a licensee and manufacturer of the motors embodying the patent. Appellee is a customer of the Evinrude Motor Company, which is defending the suit.

The court found for appellee on all issues.

Johnson patent, No. 1,467,641: The advance in the art of outboard motors represented by this patent may be best described in the language of the inventor, who in the specifications of his patent, thus spoke:

“The invention relates to out-board motors * * * and * * * is pivoted to a detachable bracket carried by the gunwale, and pivotally mounted in a sleeve in such a manner that the device may be moved entirely around or for 360 degrees in a horizontal plane. Also to provide the attaching bracket with outwardly extending slotted arms concentric with the pivotal point of the device with the detachable bracket, said arms having adjustably mounted there-between a segmentally shaped plate, which plate limits the forward movement of the tubular shaft casing and at the same time allows the tubular shaft casing and the device as a whole to be tilted in a vertical plane.
“A further object is to provide the tubular casing with a sleeve having inwardly extending segmentally shaped flanges, which flanges are so positioned that when the tubular casing has been rotated for placing the propeller in reverse position, for instance in backing, the inwardly extending flanges will engage over segmentally shaped ribs on the segmentally shaped plate, thereby holding the device against movement in a vertical plane during a backing operation.
“A further object is to provide in connection with a pivoted out-board motor, which motor is pivoted to move in a horizontal plane or a vertical plane and comprising a tubular easing on the upper end of which is mounted a motor, and the lower end provided with a propeller driven by shafting from the motor and extending through the tubular casing, a cooling circuit for the motor substantially entirely encased in such a manner that the piping from the pump located adjacent the propeller passes through the tubular casing to a point above the pivotal points of the device, and thence to the engine jacket. Also to provide a pipe connection to tlie engine jacket, which pipe connection extends downwardly through the tubular casing and discharges through the tubular casing wall at a point below the gunwale of the boat, and preferably above the water line, thereby preventing discharge of water into the boat when the boat is backing or when the device is being used not only for driving but for steering purposes.”

Two claims (2 and 9) set fortíi (and also mark the limitations of) the inventions. They are rather unusually dissimilar and disconnected for two claims appearing in the same patent. The disposition of the contentions respecting one claim in no way aids in the determination of the validity or infringement of the other.

Claim 9 reads:

“9. The combination with an outboard motor comprising
“(a) an engine supported on a tubular propeller drive shaft casing,
“(b) and cooled from a pump adjacent the lower end of the tubular casing,
“(c) of a pipe connecting the pump and the engine cooling system,
“(d) said pipe extending through the tubular propeller drive shaft casing to one side of the center of the easing.”

If appellee avoids infringement of this claim, it is because his water pipe does not actually pass through the wall of the tubular casing but lies in an indentation therein. Appellants argued that such location-of appellee’s water pipe is the mechanical equivalent of'element (d) of the above-quoted claim.

The issue is simplified by a study of the file wrapper. When the application was pending, Johnson amended this claim 9 and then stressed element (d) in this language:

“Claims 7 to 12 haye been amended to more definitely define the invention and to avoid the Hult citation. It will be seen that these claims have been amended to include the idea of the pipe connections 31 and 41 extending through the propeller drive shaft easing, which Hult does not do. In the Hult citation a water jacket is formed around the outer periphery of the drive shaft easing a. Hult requires the use of an extra sleeve b; while applicant uses the shaft casing and consequently eliminates an extra sleeve around the shaft casing, thereby reducing the cost to a minimum and forming the device in a compact form. It will be noted that applicant’s structure eliminates extra packings at the upper and lower ends of the casing, and Hult does not show means for discharging from the engine jacket at a point below the engine casing as claimed by applicant.”

Our conclusion is that appellee avoided infringement of claim 9 and kindred claims in the patent by locating his water pipe outside the wall of the tubular casing.

Claim 2, analyzed into its elements, reads:

“The combination with
“(a) A pivoted outboard motor pivoted to a bracket carried by a boat,
“(b) Said motor driving a propeller through a tubular casing, of
“(c) Spaced arms between which the tubular member is disposed,
“(d) An adjustable limiting member disposed between the arms and adjustable inwardly and outwardly
“(e) And members carried by the tubular casing and adapted to engage
“(f) Members carried by the limiting member and prevent movement of the tubular member pivotally in a vertical plane upon movement of the tubular member in a horizontal plane.”

Appellee conceded the validity of this claim, but denied its infringement.

A motor provided with a propeller shaft which was freely tiltable as well as automatically tiltable was old when Johnson conceived the structure, for which he secured this patent. Moreover, the workers in this art had produced outboard motors, which not only possessed free tilting propeller shafts as well as shafts whieh tilted freely automatically, but they had also supplied these motors with means whieh locked the propeller against tilting when it was in reverse position; that is, when in position to back up the boat. It was into this field, somewhat preoccupied at least, that Johnson entered when he designed his structure, which was offered as an effective and practical solution of the problem of providing an anti-tilting interlock for an outboard motor wherein the propeller casing, the drive shaft casing, and the engine block were integral. Such a structure contemplated, of necessity, a swing of the entire unit through a semicircle before the locking means acted.

In short, Johnson’s mechanism was but a species of the genus, an anti-tilt automatic interlock. That it worked successfully must be conceded. Nevertheless, it was a specific structure prepared for a machine of a particular design. That such a combination spelled invention may be, as it is by appellee, conceded.

Appellants argued that the inventor’s concept is such that infringement may not be avoided by a change in the mechanical means which produced the locking. If the field were a virgin one into whieh no inyentor had entered, we would readily accept appellants’ contention. For it would be •manifestly contrary to the spirit of the patent grant to permit of its avoidance through a change in a simple mechanism not germane to the inventor’s contribution. In other words, if Johnson contributed the concept of a freely tilting shaft becoming automatically locked when the propeller was moved to its reverse position, the language of the claims would be given a wide range of equivalency. But a freely tilting shaft was early found to be a necessity in the structure of an outboard motor in order to avoid damage to the motor and to the, boat, as well as danger to passengers. When the propeller struck a snag or an unexpected sand bar, unfortunate results were avoided only through such a free tilting shaft. Likewise, experience early demonstrated the necessity of providing means for locking the propeller shaft when in reverse and when the danger above alluded to was not present. The record contains illustrations of such locking devices, whieh were in usé prior to Johnson’s contribution. True, they differed substantially from Johnson’s structure, but their existence necessitates our placing this patent of Johnson’s into that class of patents where we, of necessity, must restrict the elements of the combination to a narrower range of equivalents.1 Another reason for such restriction in the range of mechanical devices appears in the different character of the two competing structures.

We do not wish to be understood as holding that broad claims may not be obtained in the field of mechanics simply because such field has been previously well occupied. The importance of the discovery and the depending range of equivalency cannot be measured by the extent to whieh the field has been preoccupied, nor is it determined by the length of the step which represents the advance which the invention marks. A short step upward may be more unusual and beset with more difficulties than a long step forward. Results, difficulties overcome, failure of others to meet the problem, the extent of the demand, and. the reward following success are the principal factors whieh must influence the courts in their efforts to classify patents for the purpose of construing claims and specifications and in fixing the range of mechanical equivalency.

We refer to the occupied field in the instant case because satisfied that the invention, measured by the above tests, covered, not a primary discovery, but was an adaptation of well-known mechanical means to the solution of a problem not outstandingly difficult in the first instance and whieh had been made much easier by others who had provided mechanical means for locking their shafts against tilting.

It is unnecessary to here set forth the drawings or to quote from the specifications to point out the differences in the two structures. Elements (e) and (f), above quoted, of the Johnson patent provide a limitation whieh is not found in appellee’s patent. The members carried by the tubular casing* engage members carried by the limiting machine only “upon movement of the tubular member in a horizontal plane.” The means provided by the defendant do not engage each other only when the movement of the tubular member is in a horizontal plane. Appellee’s counsel haye argued that the language “upon movement of the tubular member in a horizontal plane” is not descriptive of an element in the combination, but describes an operation of elements in the combination and could well have been omitted. Therefore, so it is contended, it may be disregarded in determining equivaleney of means. It seems to us, however, that the Johnson structure would lock only through such a' movement of the tubular member. The structure does not permit of operation excepting upon such a movement. The specifications, which constitute the background of the claim reading, permit of no other construction.

Appellee’s means for securing a locked shaft in reverse differed from that disclosed by Johnson. The difference is material. It cannot be said that such difference is a matter of choice of two simple mechanical means but is rather a difference necessitated by the different constructions of the two outboard motors. Finding, as we do, that this claim does not read literally upon appellee’s structure and that the difference is outside the range of mechanical equivalence, we agree with the District Judge in his finding of noninfringement.

Suit & Suit “A” patent, No. 1,207,761: The questions involving the validity and the alleged infringement of this patent are made difficult by an involved fact background. Appellants asserted that the invention is an important one and marked a decided advance in the outboard motor art and is, therefore, entitled to a liberal construction both of specifications and claims.

If the inventors made the advance claimed, we agree with appellants in their position. Eibel v. Paper Co., 261 U. S. 45, 63, 43 S. Ct. 322, 67 L. Ed. 523.

The necessity of ascertaining the place qf the invention in the art and the extent of its contribution over the prior art cannot, in the construction of patents, be overestimated. If the patent covers an invention of much merit — marks a long step upward over the prior art — then neither the specifications nor the claims should be read literally. This is particularly true of the language appearing in the specifications which are illustrative of a structure, which the inventor has in mind, or which explains an approved or preferred form of his invention or discovery. In fact, in certain discoveries, notably in the field of physics or chemistry, the applicant for such a patent does not, and cannot, early appreciate the richness of his discovery. Tears of experimentation are necessary before all of its results are known. In such eases history is more important and illuminating than speculation.

Because the patent does not cover results and because the inventor is entitled to protection for his new process or his new combination even though he does not, when he files his application, know the full consequences of his discovery, his descriptive or illustrative words, used in the specifications should rarely, if ever, be construed as words of limitation of his discovery or of his grant. The force of this observation is illustrated in the case of the mechanic who is confronted by a specific problem 'and whose experience is limited to the particular occupation in which he is engaged. In solving the specific problem before him, he is apt to overstress the form or type which is preferred in his limited field of activity. The discovery, however, may be of importance and adaptable to use in another branch of the industry, to which he is a total stranger. Therefore, his preferred or illustrated types would be of little or no value in the kindred field. Nevertheless, his combination of elements would find ready adaptation in said kindred field, and he should be protected against invasion of his discovery by the worker in such other field.

The three patents now before us illustrate the two kinds of inventions of which I have been speaking. The Johnson patent and the Hult & Hult “B” patent are of the kind which call for strict construction. The location of the pipe, for instance, in claim. No. 9 of the Johnson patent, is of the essence of the invention. Such location could not be changed from inside to outside the shaft easing without avoiding infringement. The Hult & Hult “A” patent, if valid, clearly is not of this limited class.

We set forth the prior art, the problem which confronted the outboard motor manufacturer, and the Hult and Hult solution thereof, in the language of appellants’ counsel:

“The patents in suit relate to outboard motors adapted to be detachably fastened to the back of a boat, and being of a type in which the power plant consists of an explosion engine having one or more cylinders disposed horizontally, and having the engine shaft arranged vertically and elongated so as to extend down below water level. The upper end of the engine shaft is provided with a fly-wheel which rotates in a horizontal plane and is fastened directly to the engine shaft. The engine shaft is enclosed within an elongated vertical sleeve, the lower end of which supports and is rigidly fastened to a casing — frequently referred to as the ‘gear housing’ or ‘gear easing.’ This casing forms a bearing for the horizontal propeller shaft and also encloses the gearing by which the vertical engine shaft transmits power to the horizontal propeller shaft. The sleeve surrounding the engine shaft is tumable in a horizontal plane by means of a tiller. Consequently, when the tiller is moved sidewise it moves the sleeve angularly, and this produces a corresponding angular movement of the gear easing and propeller for steering purposes.
“There were two outstanding disadvantages of the (old) construction. * * * In the first place as the engine frame was rigidly fastened to the boat, the boat was continuously subjected to a severe vibration, due to the explosions occurring within the engine cylinders. An outboard motor, * * 4 is a portable device, (and) is necessarily comparatively light in weight relatively to the amount of power generated. Being comparatively light, the engine frame was subjected to a recoil effect at each explosion and this was so severe that these outboard motors were rigidly attached to the stem boards of boats.
“A second objection lay in the fact that the engine caused the tiller to exert a strong jerky sidewise pull in the direction of rotation of the engine shaft, and this imposed a disagreeable and severe burden upon the steersman.
“Instead of fastening the engine frame to the boat as rigidly as possible, (Hult and Hult) mounted the engine frame on a loose pivot and then rigidly connected the engine frame to the gear casing at the lower end of the structure. And they fastened the tiller handle directly to the engine frame. The surprising result was that the heavy rotary kick or recoil of the engine frame, * * * was substantially neutralized by the rigid connection to the gear casing and associated* parts at the lower end of the structure. * * * The Hults were the first to perceive * * * that the recoil in the engine frame was in the opposite rotative direction, and were the first to discover that this tendency of the gear casing to rotate in one direction would be sufficient to neutralize the recoil in the engine frame and make it safe to mount the structure, if unified, (i. e., if the engine frame and gear casing were rigidly connected together) on a bearing so constructed that said unified structure would be free to rotate in a horizontal plane. * * * By this means Hult & Hult eliminated the heretofore destructive vibration of the boat due to the explosions in the cylinder; eliminated the constant side-thrust on the tiller handle, which heretofore had steered the boat off its set course; and, in addition, made steering easier.”

The first perplexing question calling for determination is the date of the disclosure of appellants’ invention. Appellee says June 16, 1915, is the date, while appellants assert July 8, 1912. Between these two dates there appeared outboard motors which have an important bearing upon the validity of this “A” patent.

Hult and Hult first made application for á patent in Sweden. Their application was there filed July 8, 1912. A similar application was made for a patent in the United States on July,3,1913. The application for the Swedish patent was abandoned. The application for the United States patent was granted and a patent, No. 1,146,427, known as the parent patent was duly issued July 13,1915. This patent is not in issue in this litigation, but its disclosures are decisive of the effective date of the “A” patent. Por on June 16, 1915, the inventors made a divisional application of this patent and this divisional application, referred to as the “A” patent, was issued December 12, 1916. It is this patent which is here under consideration. ,

• Appellee argued that this “A” patent, issued upon the divisional application, was not illustrated or described in the Swedish application nor in the similarly worded United States application, but was granted with an element included which was not referred to in the prior applications. Appellants, on the other hand, contended that the “A” patent was properly issued as a divisional application of the parent patent, the disclosures of which furnished a sufficient basis for the allowance of the claim sued on, to wit claim 2. In other words, the date of its claim goes back to the date of the application for the Swedish patent which is July 8,1912. The claim sued upon, divided into its elements, reads as follows:

“In an outboard motor, the combination with
“(a) A motor having a central crank casing,
“(b) Engine cylinders arranged symmetrically at opposite sides of the easing and
“(c) An extended motor shaft in line with the crank easing,
“(d) A propeller driven from said motor shaft,
“(e) A sleeve surrounding said motor shaft and immovable relatively to the motor,
“(f) And means in which said sleeve is freely revoluble and by which said motor is supported.”

If we were permitted to rest our decision solely upon the specifications, there would be more force in appellants’ argument. But an examination of the file wrapper showed that appellants restricted themselves by their action in the Patent Office. The claims, as originally drawn, did not include element 2. As thus drawn, the examiner rejected all claims on the basis of two patents, one of which, bearing date October 21,1913, was to Nydegger. Applicants then amended the claim to insert element 2 and wrote the Patent Office:

“By the foregoing amendment applicants have limited the claims to a construction including a balanced motor, i. e., one in which the engine cylinders are arranged symmetrically at opposite sides of the crank easing and the engine shaft depends in line with the crank casing. The combination thus claimed appears to be rlovel over the art.”

They supplemented this amendment by a further argument a few days later, stating:

“Supplementing the last paper filed in this ease applicants beg to point out that the present application is a division of 777,152, which was filed on July 3, 1913 and corresponded to the Swedish application which was filed July 8, 1912. Under these circumstances it is submitted that the patent to Nydegger, which was issued on October 21, 1913 and the application for which was filed May 3, 1913 is not a reference against this ease.”

Upon this argument and with element 2 of the combination thus stressed, the Patent Office ordered the patent to issue.

In view of this record appellants are estopped to assert that element 2 was not of the essence of their invention.

As stated in I. T. S. Rubber Co. v. Essex Rubber Co., 272 U. S. 429, 47 S. Ct. 136, 141, 71 L. Ed. 335:

“The applicant having limited his claim by amendment and accepted a patent, brings himself within the rules that if the claim to a combination be restricted to specified elements, all must be regarded as material, and. that limitations imposed by the inventor, especially such as were introduced into an application after it had been persistently rejected, must be strictly construed against the inventor and looked upon as disclaimers.”

"With appellants’ contention that element 2 was nonessential eliminated, we approach the query, Were the disclosures of the parent application sufficient to support a divisional application for a patent each claim of which contained element 2? A study of the specifications and drawings of said parent application compels us to answer this inquiry in the negative.

The fundamental thought of the original application, it is true, would apply to a motor with one or two cylinders. But the necessity of two cylinders specifically located was no part of this concept. In other words, the combination disclosed in the parent application might be used with an engine containing either one or two cylinders. Neither the combination nor the specifications upon which it was based suggested the necessity of, must less demanded, the presence of two cylinders arranged symmetrically at opposite sides of the casing. In fact, the very requirement of element 2 negatives the thought of a combination wherein one element called for two cylinders specifically located. If the disclosure of the parent application might be used with equal facility upon a one or a two-cylinder motor, it would seem to show that such application could afford no basis for a divisional application which was to support a patent where the two cylinders specifically located were of the essence of the combination.

In the specifications of the parent application, the applicants say:

“Outboard motors constructed according to this invention are characterized, principally, by the arrangement that the motor is rotatable round a vertical (or somewhat inclined) axis, * * *. A simple and suitable suspension of the motor is obtained through the arrangement that the sleeve which, as is usual, surrounds the motor shaft, (hereinafter called the ‘shaft-sleeve’) is mounted in a ring or sleeve (hereinafter called the ‘attachment sleeve’) which is pivotally connected with that part of the suspension arrangement that is fastened to the boat, in addition to which the shaft-sleeve is adjustable within the attachment sleeve.”

This language furnishes no support for the disclosure appearing in the specifications of the “A” patent:

“The combustion motor or engine-comprises two oppositely disposed cylinders 1, provided with the usual operating appurtenances, * * * . Owing to ’ the fact that in the present structure the motor and its shaft together with the sleeve surrounding the same form practically a unitary structure, we obtain the advantage that the force which tends to rotate the motor system in the direction of rotation of the motor shaft is counteracted by the counter pressure of the motor on its cylinders, so that the work of the helmsman is rendered very much easier.”

Our conclusion, therefore, is that the original specifications furnished no basis for a divisional application, where, as a necessary element of each claim, there were “engine cylinders arranged symmetrically at opposite sides.” This conclusion necessitates our consideration of the prior art as of the date of June 16,1915.'

The prior art as of this date included a British patent, No. 22,312, issued in 1902, a United States patent to Waterman issued in 1907, and the Waterman motor designed and sold during the year of 1907, the United States patent to Hasehke issued March 26, 1912, the Stockemann United States patent applied for August 16, 1913, the Buehner motor made and publicly used during the summer of 1914, the Hult and Hult “B” patent issued January 4,1916, and others. For reasons which need not be elaborated, we have excluded from our consideration of the prior art the Hult “B” patent. The remaining prior art, however, contained disclosures which anticipate the Hult invention. The Hasehke patent dealt with a motor operated by electricity, but the art was the same and the disclosures therein appearing must be considered as a part of the' prior árt. Assuming as we do .that “the essence of the Hult invention resided in the mounting of the horizontal explosion engine cylinder, the sleeve, and the propeller carrying gear casing to turn freely as a unit about the vertical engine cylinder drive shaft as an axis,” we are satisfied that they were fully anticipated by the Buehner motor, the Waterman motor, as well as by the Stockemann patent.

In all of these motors there was, of course, some difference in the arrangement of the parts to the combination. Nevertheless, their occupancy of the field prior to Hult’s entry made it impossible for him to secure a monopoly for the combination he disclosed.

Hult “B” patent, No. 1,166,523: It would serve no useful purpose to here elaborate our views on this patent. It was not a primary patent and was not entitled, upon the question of infringement, to a wide range of equivalents. The District Court correctly disposed of it in the following language:

“If the claims in suit are construed to embrace either of the alleged infringing devices, they are invalid in view of the Waterman and Buehner motors, and the disclosures of patents 1,021,408 to Hasehke, 1,-131,287 to Stockemann and 1,146,427 to Hult. In either aspect the decree should be for the defendant on these claims.”

We conclude that none of the three claims sued upon was infringed by appellee.

The decree is affirmed.


author: PARKER, Circuit Judge.

text:
    UNITED STATES v. WESCOAT.
    No. 3102.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.

      Bayless L. Guffy, Atty.,'U. S. Veterans’ Bureau, of Washington, D. C. (James Damron, U. S. Atty., Okey P. Keadle and David F. Sheets, Asst. U. S. Attys., all of Huntington, W. Va., and William Wolff Smith, Gen. Counsel, U. S. Veterans’ Bureau, of Washington, D. C., on the brief), for the United States.
    Roderick G. Merrick, of Charleston, W. Va., for appellee.
    Before PARKER and NORTHCOTT, Circuit Judges, and GLENN, District Judge.
   PARKER, Circuit Judge.

This is an action on a war risk insurance policy to recover disability benefits. Plaintiff was discharged from the army May 26, 1919. Premiums paid on the policy continued it in force until August 31,1919. Plaintiff contends that he was then totally and permanently disabled within the meaning of the poliey, and that he has continued in that condition. There was a verdiet and judgment in his behalf, and the defendant has appealed.

It is not neeessary to review the evidence. While there was some conflict as to the extent of plaintiff’s disability, there can be no question that his evidence presented a case for the consideration of the jury within the principles laid down by us in Carter v. U. S., 49 F.(2d) 221, this day decided.

The trial judge erroneously instructed the jury, as he did in the ease of United States v. Searls (C. C. A.) 49 F.(2d) 224, this day decided, that, where the insured developed active tuberculosis prior to January 1, 1925, he was presumed to have contracted it while, in the army. We think, however, that the error here was harmless. In the first place»- there was practically no doubt under the evidence that the tuberculosis of plaintiff originated during his army service; and the controversy in the ease was, not as to the origin of the disease, but as to the extent and permanency of the disability. In the second plaee, the court clearly, correctly, and fully charged the jury as to what constituted total and permanent disability within the meaning of the poliey, charging them explicitly in this connection that, before plaintiff .could recover, he must satisfy them, by a preponderance of the. evidence, that he was totally disabled from carrying on continuously any substantially gainful occupation, and, in addition, that such disability was founded on conditions which made it reasonably certain that it would continue throughout his lifetime. In view of this charge, we do not think that the erroneous instruction that the disease was . presumed to be of service origin could have prejudiced defendant; and in this respeet the instant case differs from the Searls Case, where the presumption as to service origin was made practically determinative of the issue.

Defendant excepted to the admission in evidence of a tag, field medical card, and the envelope in which this card was contained, which were identified by plaintiff as having been attached to his clothing in a field hospital in France and worn by him when being sent to America with a group of disabled soldiers. The tag was dated “3/13/19” at Camp Montori C. H. 85, and purported, to be .signed by one Lieut. M. H. Keefer. The field medical card showed the dates of plaintiff’s admission to various hospitals and the date of his being sent to the United States. It bore the signature of various officers of the Medical Corps of the United States Army and over the first of these appeared the following entry: “Came to sick call to have eyes examined. Has been failing in sight for some time. No other symptoms. P. E. Negative aside from eyes. Final diagnosis marked choroiditis bilateral.” The envelope in which the field card was contained showed the diagnosis of plaintiff’s ailment as “choroiditis bilateral.” All bore the name of plaintiff, his rank, regiment, and identification number. No objection to their admis1 sion appears to have been made on the ground that they were not in all respects genuine, or that they were not properly identified. While the record does not show the ground of the objection in the court below, and same might be ignored for that reason (U. S. v. U. S. F. & G. Co., 236 U. S. 512, 529, 35 S. Ct. 29S, 59 L. Ed. 696; District of Columbia v. Woodbury, 136 U. S. 450, 462,10 S. Ct. 990, 34 L. Ed. 472), we assume that the sole basis of the objection there, as it is here, was the rule against the admission of hearsay testimony.

We think it perfectly clear that these papers and the entries thereon fall within the exceptions to the hearsay rule. The entries were made in regular course by government officials, whose duty it was to record the facts, and who had no motive to record anything except the truth. They constitute, moreover, the best evidence possibly obtainable of the observations and opinions of the medical officers whose signatures appear; for, being made at the time of the observations and transactions recorded, they are necessarily more complete and accurate than could be the memory of a physician or surgeon of the details of the hundreds of cases that daily passed before him in a field hospital a dozen or more years ago. To exclude such evidence and to require disabled veterans in eases such as this to produce the army surgeons who treated them would be to deprive them of important evidence bearing upon the origin of their disability; for it would be practically impossible for them to locate and produce the surgeons who treated them and made the records, and, if produced, these surgeons would probably have no recollection of the matters to which the records relate.

The evidence offered falls clearly within the principles under which exceptions to the hearsay rule are admitted, i. e., necessity and circumstantial guaranty of trustworthiness. Wigmore on Evidence, vol. 2, §§ 1420 et seq. Tested by the first principle, the persons making the entries are not as a practical matter available as witnesses, and evidence of importance to the parties would be lost if entries made by them were not received. Tested by the second, the entries were made by highly intelligent officials of the government in the discharge of their official duties, with no motive to state anything but the truth and subject to reprimand and humiliation in the eyes of their professional associates if they were inaccurate. It is hard to imagine a situation where entries made would come with a stronger guaranty of their trustworthiness.

In the case of Mississippi River Logging Co. v. Robson (C. C. A. 8th) 69 F. 773, 781, certain scale books were admitted in evidence showing the amount of timber cut from plaintiff’s land. It was objected that these books were not admissible and that the scalers should have been produced to testify to the facts; and what was said by the court there, quoting from the opinion of the judge below, is pertinent here: “The mode by which the entries are made ón the scale book is such as to assure accuracy therein. The parties who cut and haul the logs, and the owner, who is to pay for the cutting and hauling, act upon the contents of the books, and deem them to be proper evidence of the facts therein stated. That which is received and acted upon by persons engaged in any line of business as competent evidence is ordinarily admissible when the same fact becomes a matter of inquiry in judicial proceedings. It would seem, therefore, that the scale books should be admitted in evidence, unless it appears that there is better evidence within the power of plaintiff to produce. It is said that the camp sealers should have been hunted up, and their testimony be introduced, in order to show the number of logs, and the contents thereof, cut on plaintiff’s land during the time in controversy. "What is sought to be proved is the result, in number and quantity, of the logs cut. When the scalers made the count and measurement, •two records thereof were made, — one in the memory of the scaler, the other in the scale book. Which is now the best evidence? Tears have elapsed. The entries on the scale books remain unchanged. They are now just what they were when originally made. Can the same be said of the record made upon the memory of the scalers ?”

In Wisconsin Steel Co. v. Maryland Steel Co. (C. C. A. 7th) 203 F. 403, book entries showing amounts paid for wages and time cards signed by workmen upon which the book entries were based were held properly admitted in evidence, without the production of the workmen who signed the cards,- both under the rules of the common law and under the Wisconsin statute, which was held to be merely declaratory thereof. In Heike v. U. S. (C. C. A. 2d) 192 F. 83, entries of weights of cargoes of sugar made by government weighers, and also those made by private weighers, were held competent in evidence, as entries made in the regular course of business, -without producing the persons who made them. Other federal cases establishing the same rule will be found collected in the note to Wigmore, vol. 2, p. 281.

While the ease at bar differs from a number of the eases cited, in that the records there offered were business entries of a permanent nature, whereas the records here are mere cards intended to serve a temporary purpose, we think that the eases cannot be distinguished in principle. The records were admissible in those cases, not because of their form or because they related to commercial transactions, but because they were made in the ordinary course of duty under such circumstances as to preclude the probability of their being false, because they furnished the best evidence obtainable as to the matters to which they related and because of the practical necessity of their being received if any evidence relating to those matters was to be had. All of these considerations apply to the records here. If the records made by laborers as to working time, by sealers of lumber as to measurements, or by weighers as to weights of cargoes, are to be received in evidence, we see no reason for excluding records made by officials of the government in treating wounded or diseased soldiers, where in the nature of things the officials cannot be produced, or, if produced, could not give testimony as satisfactory as the records themselves. The rules of evidence are not rules of a game. Their sole purpose is to enable courts to arrive at the truth of matters under investigation. The hearsay rule is important, but courts should not hesitate to recognize exceptions to it where such exceptions fall within recognized principles and are necessary to the ascertainment of truth and the doing of justice.

The other exceptions in the record do not merit discussion. For the reasons stated, the judgment below will be affirmed.

Affirmed.