author: WILBUR, Circuit Judge.

text:
    WOODRUFF v. LAUGHARN.  In re GOLDEN STATE GEM CO.
    No. 6389.
    Circuit Court of Appeals, Ninth Circuit.
    June 1, 1931.

      J. A. Coleman and Ed Fitzpatrick, both of Los Angeles, Cal., for appellant.
    Robert L. Beveridge, of Los Angeles, Cal., for appellee.
    Before WILBUR and SAWTELLE, Circuit Judges, and ST. SURE, District Judge.

      Rehearing denied September 14, 1931.

   WILBUR, Circuit Judge.

This action was brought by the trustee of the estate of the Golden State Gem Company, a corporation, bankrupt, to secure possession of certain property alleged to belong to the bankrupt but in the possession of the appellant, Leonard J. Woodruff, under claim of ownership, based upon a-purchase by him of the property at an execution sale in pursuance of the foreclosure of a chattel mortgage executed by the bankrupt, as mortgagor, to the appellant as mortgagee. The trustee in bankruptcy by his, action challenges the validity of the mortgage, the indebtedness purporting to be secured thereby, and the validity of the mortgage foreclosure and sale, upon the ground that the mortgage ■ was fraudulent and void as to creditors, and that the decree of foreclosure was procured by collusion between the bankrupt and the appellant. Although the trustee claimed in his petition that the indebtedness alleged to be secured by the chattel mortgage was fictitious, the evidence shows and the special master found as a fact that there was a bona fide indebtedness at the time of the execution of mortgage owing from the bankrupt to the appellant for $18,000. It appears that this indebtedness was at the time of the execution of the mortgage, on August 3, 1927, also secured by a pledge of precious and semiprecious stones in the safe deposit box in the Security First National Bank of Los Angeles of an aggregate value of $78,000, but the special master found as a fact that it was doubtful whether the stones so pledged would sell for enough to pay the total indebtedness due from the bankrupt to the appellant, aggregating $28,000.

The only evidence tending to support the charge of actual fraud in the execution of the chattel mortgage for the purpose of hindering and delaying creditors is the evidence which tends to indicate that the purpose of the mortgage was to prevent the creditors of the corporation from seizing the property pending the formation of a Nevada corporation and the issuance of a part of the stock thereof in payment of the indebtedness due the appellant. It appears that the appellant was pressing the bankrupt for further security in the form of a chattel mortgage, and as he was in a position to immediately enforce his claims against the bankrupt corporation, there was no actual fraud to be inferred from the mere execution of the chattel mortgage. The trustee’s allegation of fraud was based largely upon the contention that there was no indebtedness due from the bankrupt to the appellant, and the charge of fraud in that regard fell when it was clearly shown that there was such bona fide indebtedness. The trustee in bankruptcy also counted upon the invalidity of the chattel mortgage upon the ground that it covered property not authorized to be hypothecated by a chattel mortgage, namely, “the stock in trade of a merchant,” and therefore, under section 2955 of the Civil Code of California, the mortgage was void as to creditors. The trustee also contends that the mortgage is invalid under the terms of section 3440 of the Civil Code of California, as amended in 1925. Cal. Stat. and Amendments 1925, p. 725. This statute provides that a mortgage of the fixtures or store equipment of a machinist or retail or wholesale merchant is conclusively presumed to be frauduluent and void against the existing creditors unless a notice of intention to execute the intended mortgage is filed in the office of the county recorder seven days before it is executed. No such notice was filed. The special master held that, as to part of the property mortgaged, the mortgage was void as to creditors on the ground that it was “stock in trade of a merchant” not authorized to be so hypothecated (section 2955, Cal. Civ. Code, supra); that as to part of the property the mortgage was void as to existing creditors under section 3440 of the Civil Code of. California, supra, on the ground that such property was furniture and fixtures or store equipment within the meaning of that section, and no notice of the intended mortgage was filed for reeord. As to the other property covered by the mortgage, the special master held that the mortgage was not authorized by the board of directors at a regular or special meeting, as required by the provisions of section 320a of the California Civil Code, which is as follows : “When all the directors of a corporation are present at any directors’.meeting, however called or noticed, and sign a written consent thereto, on the record of such meeting, or if the majority of the directors are present, and if those not present sign in writing a waiver of notice of such meeting, whether prior to or after the holding of such meeting, which said waiver shall be filed with the secretary of the corporation, the transactions of sueh meeting are as valid as if had at ■ a meeting regularly called and noticed. 1929.”

With reference to the alleged conspiracy between the parties to the foreclosure proceeding, it is admitted that the action was allowed to go by default, but the only effect of sueh default was to waive the remedies of the corporation and thus waive any defect in the execution of the mortgage. It is not claimed that there was any other defense which could have been successfully interposed by the bankrupt. The petition in bankruptcy was filed within four months after the decree of foreclosure of the chattel mortgage, and the execution sale was made within that period, so that the lien acquired by the judgment of foreclosure and the title acquired by the purchaser would be subordinate to the rights of the creditors, as to whom the mortgage was void. 11 USCA § 107, subd. f. That is, as to them, the lien declared in the decree of foreclosure would not relate back to the date of the chattel mortgage, but would have its inception at the time of the decree, which, so far as the existing creditor’s are concerned, had no more validity than an agreement of that date between the mortgagor and the mortgagee that the mortgagee should have a lien upon the personal property described in the mortgage. The mortgagee having purchased the mortgaged property, we may, in this proceeding, consider the question of the validity of the chattel mortgage as to existing creditors of the bankrupt, unembarrassed by the foreclosure and sale thereunder.

As to appellant’s contention that the evidence shows that the bankrupt was a manufacturer and that the stock of sueh a manufacturer may be mortgaged notwithstanding it is held for purposes of sale, he cites a decision by the Supreme Court, of California. Phillips v. Byers, 189 Cal. 665, 209 P. 557, 560. In that case the property involved consisted of 585 dozen cans of string beans and 32 dozen cans of catsup in the hands of the Standard Canning Company, whose business was buying and canning fruit and vegetables. The issue in that case was whether or not the canning company was a manufacturing corporation or a merchant. The trial court found that it was a merchant, and held the mortgage void. The Supreme Cpurt reversed the .ease, stating:.

“In the ease at bar there is no • question but that the string beans and catsup which were attached were canned by the Standard Canning Company, and this constituted it a manufacturer. The evidence shows it sold both on contract and on orders for goods which it had already canned. It also shows that goods were sold only to brokers, jobbers, and wholesale grocers. There is no evidence that such goods were sold for any profit other than that ordinarily made by the manufacturer; that is, there were no sales at a figure which would give the company the profit ordinarily made on a purchase and sale by a middleman. The company did not act as its own broker or wholesaler, and there was uncontra-dieted evidence that it did no retail business and bought no manufactured products for the purpose of making a profit on a resale. It received no profits other than those earned through canning vegetables.
“Therefore, giving full weight to the testimony that the company sold its manufactured goods standing in the warehouse, as well as those manufactured to order, sueh a fact would not be sufficient to render the company a merchant.”

In the case at bar, the situation is entirely different. It appears clearly from the evidence without any dispute that the bankrupt had engaged in the wholesale and retail jewelry business, and that as an incident thereto it manufactured jewelry from stones and material purchased in the rough, and that it also sold such materials in the rough at wholesale or retail as occasion demanded. The special master did not specifically determine what portion of the property described in the mortgage was a “stock in trade of a merchant” nor what portion thereof constituted “furniture and fixtures” nor what property was neither the one nor the other, but he held the entire mortgage void as to existing creditors for the reasons hereinabove mentioned. Walter Calvin Smith, the president and general manager of the bankrupt corporation, testified that the property described in the first paragraph in the description of property of the chattel mortgage was used daily in the operation of cutting and manufacturing gems and jewelry, that this property cost in excess of $10,000 and was worth that amount as part of the going concern. It appears from this testimony, which is not disputed, and from the nature of the property itself, that this property was a proper subject for chattel mortgage as authorized by section 2955 of the Civil Code of California. It also appeal’s that it was not fixtures or store equipment of machinists or retail or wholesale merchants within the meaning of section 3440 of the Civil Code of California, supra, and that as to these machines used exclusively in the manufacturing department of the bankrupt the mortgage thereof created a lien thereon valid as against existing creditors. The items referred to are as follows: “18 electric motors, 1 large grinding head with bases, 5 polishing heads, 3 brilliant cutting machines, 9 brilliant cutting laps, 12 eabachon cutting wheels and buffs, 1 foot press, 1 screw press, 3 small lathes, 1 rolling mill, 2 blowers and furnaces, 3 drill presses (1 hand, 1 electric, 1 belt driven), 1 electric soldering machine, 4 gang brilliant cutting machines, 4 saw heads with pulleys, belts and shafting, 2 jewelers’ benches, 1 metal cutter, 1 ring bender, 2 casting machines (shafting, pulleys, machinery part and tools).”

The same witness testified that the property described in the next paragraph of the mortgage was used to do merchandising with, wholesale and retail. This would bring the property within the statute prohibiting the mortgage of fixtures or store equipment of a retail or wholesale merchant without the recordation of a notice of intention to execute the mortgage seven days before its execution and justify the finding of the special master and its approval by the court. The mortgage of this property was void as to existing creditors. Section 3440, Cal. Civ. Code; Moore v. Bay (C. C. A.) 45 F.(2d) 449. With reference to the balance of the property, the witness testified:

“The rest of the list on the mortgage, starting out with 200 pounds petrified wood, ending with 375 carats sapphires, were specimens. Referring to the petrified wood, that was just a specimen, I imagine, of interest to tourists more than anything else. We keep it in the store for the purpose of selling them. A lot of these rough materials were used to cut and manufacture with, and the rest of them used for gems and jewelry and kept there for the purpose of cutting and polishing and selling.
“The Master: Well, * * * but what I want to know first is, can you designate what of that merchandise was kept in the store previously and what, if any of it, was there to be cut or polished or worked upon in any way in the factory.
“Even the rough material, I sold rough material in the rough as well as finished produce to lapidarists, collectors and private people Who wanted the specimens of these stones. I sold it cut and unset to both private people and stores, both finished product and mounted. Both to stores and private people.
“Mr. Beveridge: Q. Just state how the corporation acquired the uncut gems and so-called rough merchandise. A. Well, they bought them from the different miners of this gem material. It was sold, as I said before, cut, uncut and mounted. Well, I sold good-sized quantities in the rough without any labor thereon. We got orders continually for 'different materials in the raw, every day the year around. I sold it to lapidarists. I sold it to collectors of these gem materials, I sold it to people who wanted souvenirs, stones to take east with them, tourists and like that. I would say, without going into it item for item, the value of all those articles the court referred to from the first article, 200 pounds of petrified wood down to the end, 375 carats cut sapphires, would be above $50,000. That might be a long ways off, but it is over that. I believe that is very conservative.”

We deem it unnecessary to set forth a statement in detail of these various items estimated by Mr. Smith to be worth $50,000. Such description covers over two pages of the transcript. As to these items the evidence justifies and requires the conclusion that the mortgage was void as to existing creditors by reason of the fact that it was property not authorized to be mortgaged by the law of California, because it was “the stock in trade of a merchant.” Section 2955, Cal. Civ. Code, supra. It follows that the special master was in error in holding the mortgage void as to the meehinery used in the manufacture of jewelry and herein-above itemized, but that the conclusion of the master and of the trial court was correct as to the balance of the property. As to those items in the mortgage wherein the mortgage was void as to existing creditors, the foreclosure sale was void as to them. The appellant, as purchaser of the mortgaged property with knowledge of the rights of the creditor, is not entitled to possession of any of the mortgaged property other than that just mentioned, which he is entitled to retain as additional security for the indebtedness due him.

The decree is modified in conformity with this opinion as follows:

In the paragraph thereof declaring plaintiff to be the owner of all the property described in the chattel mortgage a proviso shall be inserted after the word “mortgage” excepting therefrom the machinery herein-before specifically itemized as included in the first paragraph of the list of property described in the mortgage.

The next paragraph of the deeree in regard to the sale by the trustee in bankruptcy of the jewelry, precious and semiprecious stones located in the safety deposit box at the Security First National Bank of Los Angeles in the name of the appellant, Leonard Woodruff, the decree is so far modified that the aforementioned machinery be included in the proposed sale by the 'trustee, or, in default of a purchaser for the amount due to the appellant, be included in the property to be turned over to appellant to satisfy his debt.

The paragraph of the decree appointing E. E. Moss, Esq., as special master, and requiring a report to him of such sales, is modified so as to include a report upon sale of the pledged and mortgaged property.

The next paragraph is correspondingly modified.

As so modified, the deeree is affirmed.


source: Caselaw Access Project

author: ST. SURE, District Judge.

license: Public Domain

text:
    RIVOLI DRUG CO. v. LYNCH.
    No. 6378.
    Circuit Court of Appeals, Ninth Circuit.
    June 1, 1931.
    Robert E. Austin and John N. Helmiek,. both of Los Angeles, Cal., for appellant.
    Samuel S. Gelberg, of Los Angeles, Cal.,, for appellee.

      Before WILBUR and SAWTELLE, Circuit Judges, and ST. SURE, District Judge.
   ST. SURE, District Judge.

E. A. Lynch (appellee herein), as receiver in bankruptcy of J. T. Scully, doing business as Rivoli Pharmacy, filed a bill of complaint for accounting and appointment of receiver and injunction. Briefly stated, the bill alleged that on November 5, 1930, an involuntary petition in bankruptcy was filed against J. T. Scully, doing business as Rivoli Pharmacy; that appellee was appointed and qualified as receiver in the bankruptcy proceedings; that it is the receiver’s duty, under the law, to take charge of the bankrupt’s property and to preserve and protect the same until the adjudication and qualification of a trustee; that prior to the bankruptcy proceedings there were a series of transactions extending over a period of time by and between the alleged bankrupt, doing business as Rivoli Pharmacy and the Rivoli Drug Company, a corporation (appellant herein)-; that these transactions involved transfers of large quantities of merchandise from the store of the bankrupt to the store of the corporation, joint purchases from wholesale houses, use of the same trade-name by both stores, representations made to wholesalers and manufacturers that both stores were one and the same concern, said representations having been made for credit purposes and extension of credit by creditors on that assumption, shipment of merchandise by wholesalers to one or the other of said stores on such joint purchase orders; that transfers were made by the alleged bankrupt to appellant of a substantial portion of his stock in trade without consideration and in violation of section 3440 of the Civil Code, of California; that there is an unexplained absence of any books or records of the alleged bankrupt pertaining to these transactions, and as a consequence appellee has been unable to fix the exact amount of money or property due to appellee from the alleged bankrupt, or to ascertain the exaet nature of the transactions or relations between the alleged bankrupt and appellant, whether joint enterprises or partnership or either or both; that the appellant is indebted to the appellee in large sums of money or property; that the accounts between the alleged bankrupt and appellant relative to said transactions are so complicated and indefinite that appellee has no remedy at law; that there is not sufficient money or property in the hands of appellee to pay the bankrupt’s creditors in full; that the liabilities are greatly in excess of the assets; that the alleged bankrupt has at all times refused and neglected to render appel-lee a full, true, and correct statement between the alleged bankrupt and appellant; that appellee is informed and believes the alleged bankrupt is insolvent; that there is danger of irrejDarable loss and injury to ap-pellee and the creditors of the alleged bankrupt, and that it is absolutely necessary that a receiver be appointed; followed by a prayer asking for an accounting and settlement of the joint affairs and transactions of the alleged bankrupt and Rivoli Drug Company, a corporation, and the appointment of a receiver, and the usual restraining order in such eases.

Upon the verified bill, the District Court made an order appointing a receiver, and restraining Rivoli Drug Company, a corporation, from disposing of any of its property or assets, etc.

Appellant made a motion to dismiss the bill, and also a motion to discharge the receiver. Both motions were made upon the grounds that the court had no jurisdiction of the parties or subject-matter, and that the bill did not set forth a cause of action. Upon the motion to discharge the receiver, it was further alleged that the ease was not a proper one for the appointment of a receiver. The motion to dismiss was heard upon the bill, and the motion to discharge was heard upon the bill and affidavits filed by the parties, and the records of the court. The motions were heard together and orders made denying same and ratifying and affirming appointment of receiver, from which this appeal is taken.

It is first contended that the court erred in denying the motion to dismiss. An examination of the bill shows that it contains all of the allegations essential in a cause for an accounting. The allegations show questionable transfers of property without consideration, confused and complicated accounts, and the absence of books of account of alleged bankrupt; the existence of a trust or fiduciary relation. See Corpus Juris, vol. 1, p. 613. Matters of account are per se within the scope of equity jurisdiction. No precise rule can be laid down as to the cases in which a court of equity will exercise its jurisdiction. The court reserves itself a large discretion upon the subject, and will take or refuse jurisdiction according to the circumstances of the case. Corpus Juris, vol. 21, § 108b, p. 132. An accounting may generally be had in equity where funds or property are jointly owned and one party refuses to account to the other for his share thereof, if the remedy at law is inadequate. Corpus Juris, vol. 1, § 75b, p. 624. The existence of any confidential or fiduciary relation is sufficient to invoke such jurisdiction. This rule applies equally to trusts created by implication of law. Corpus Juris, vol. 1, pp. 621, 622. Equity jurisdiction may be invoked in the adjustment of rights and interests of part owners. Corpus Juris, vol. 1, p. 626.

In addition to the facts alleged in the bill, the affidavits used on the hearing’ show that J. T. Seully, the alleged bankrupt, and J. A. Seully are father and son; that the two stores are designated as No. 1, operated by J. T. Seully, and No. 2, operated by J. A. Scully; that J. T. Seully has paid many of the bills of store No. 2, claiming that he advanced the money to his son; that J. A. Seully claims that he is the owner of all the capital stock of the Rivoli Drug Company, a corporation; that the bank account of the corporation has been subject to cheeks signed by either J. T. Seully or J. A. Seully; that there were movements daily of merchandise from store No. 1 to store No. 2; that both stores were always represented by both J. T. Scully and J. A. Seully and others as being one concern; that both used the same delivery truck; that until trouble with creditors began there was only one bookkeeper for both stores, and cheeks for both stores were signed by J. T. Seully.

We think that the motion to dismiss was properly denied.

The second and third assignments of error relating to denial of the motion to discharge receiver and order ratifying and affirming the appointment may be considered together.

It is contended that the receiver in bankruptcy did not acquire any right to the property in controversy, or any right to bring an action therefor. All of the contentions and arguments of appellant in this behalf are implicit in the claim of want of jurisdiction, and stand or fall with our holding in that particular.

Section 11 of title 11USCA, defines courts of bankruptcy and their powers. In clause 3 of said section it is provided that the court shall have power to “(3) appoint receivers or the marshals, upon application of parties in interest, in case the courts shall find it absolutely necessary, for the preservation of estates, to take charge of the property of bankrupts after the filing of the petition and until it is dismissed or the trustee is qualified.”

It is stated in appellee’s brief, and was-reiterated without denial during the oral argument before this court, that the receiver-in bankruptcy, “before instituting this action, first applied for and obtained leave of court in the bankruptcy proceedings of J. T. Seully by a special petition setting forth the necessity and exigency of the case, and the court duly entered its order authorizing the receiver to bring this suit.”

The question before us for decision resolves itself into this: Has the receiver the right to maintain the suit here under consideration ?

In an early case in California, In re Fixen & Co., 96 F. 748, Judge Wellborn of the District Court laid down the broad rule that, where the court of bankruptcy appoints a receiver to take charge of the property of the bankrupt after the filing of the petition and until it is dismissed or the trustee is-qualified, as authorized by clause 3 of section 11, the functions of such receiver are not limited to the receipt and custody of such property as may be voluntarily surrendered to him, but it is his duty to collect and recover the property by suit, if necessary, and the court has jurisdiction, in appointing such receiver, to authorize him to institute all necessary actions at law or in equity for the recovery of the bankrupt’s property. Also see West v. Empire Life Ins. Co. (D. C.) 242 F. 605; McKenna v. Randle, 5 Alaska, 590; Ellis v. Feeney & Sheehan Bldg. Co., 187 App. Div. 481, 176 N. Y. S. 61, affirmed 230 N. Y. 565, 130 N. E. 895; In re Dempster (C. C. A.) 172 F. 353.

There are eases holding the contrary view. As was said in Bingaman v. Commonwealth Trust Co. (D. C. Pa.) 1 F.(2d) 505, 507, “whether the receiver before the adjudieation has the implied authority to bring suit for the recovery of the property of the bankrupt not in his possession is a vexed and disputed question. Authorities may be marshaled in support of the affirmative or negative of the conclusion. No doubt it may very well be decided either way, since in the opinion of the court the matter is dependent at least to some extent upon the particular facts or circumstances of the ease.”

. Quoting from In re Dempster (C. C. A.) 172 F. 353, 357: “It has been held that a receiver in bankruptcy has no power to maintain suits for the recovery of property in the possession of third parties under a claim of right. Boonville National Bank v. Blakey, 107 F. 891, 47 C. C. A. 43; In re Kolin, 134 F. 557, 67 C. C. A. 481; Guaranty Title & Trust Co. v. Pearlman (D. C.) 144 F. 550. It would be easy to press the doctrine of these eases too far. It is true, as they hold, that the collection of the estate belongs to the trustee; but its preservation pending the election of a trustee is the duty of the receiver, and in many cases the property of the bankrupt can only be saved from dissipation by the receiver’s taking it into his immediate actual possession. His powers in preserving the estate are larger than those of a trustee. When necessary for its preservation. the court may direct him to take possession of property, although the same is held adversely under a claim of right — property so situated that the trastee could only recover it by a plenary action. This is the express holding of the Supreme Court in Bryan v. Bernheimer, 181 U. S. 188, 21 S. Ct. 557, 45 L. Ed. 814. It is true that in that ease the party having adverse possession intervened in the bankruptcy court by petition for the protection of -his right. But the Supremo Court declares broadly the power of the receiver or marshal to take possession of property though held adversely. It quotes from the ease of Sharpe v. Doyle, 102 U. S. 686, 26 L. Ed. 277, where the court sustained the exercise of such a power under the act of 1867 by an officer proceeding in invitum, and holds that the doctrine declared in that ease is equally applicable to receivers and marshals acting under the present bankruptcy law. See, also, Feibelman v. Packard, 109 U. S. 421, 3 S. Ct. 289, 27 L. Ed. 984; In re Rochford, 124 F. 182, 59 C. C. A. 388. As the Supreme Court points out in Sharpe v. Doyle, this power is indispensable to the preservation of estates. If it di'd not exist, it would be possible for dishonest bankrupts and those acting in collusion with them to completely dissipate the estate. Horner-Gaylord Co. v. Miller (D. C.) 147 F. 295.”

It would seem that the right is to be exorcised only in particular and exceptional eases demanded for the preservation of the estate. We think it apparent from the facts before us in the instant case that the suit brought by the receiver in bankruptcy was proper as looking toward the preservation of the assets of the alleged bankrupt’s estate. Otherwise, under the circumstances', the property might have been lost.

We find no error or abuse of discretion in the proceedings had in the court below; hence the orders appealed from are affirmed.


text:
    NORTHWESTERN NAT. INS. CO. v. McFARLANE.
    No. 6377.
    Circuit Court of Appeals, Ninth Circuit.
    June 1, 1931.

      R. W. Palmer and Orriek, Palmer & Dahlquist, all of San Francisco, Cal., for appellant.
    W. M. Conley, Philip Conley, Matthew Conley, and Conley, Conley & Conley, all of Fresno, Cal., for appellee.
    Before WILBUR and SAWTELLE, Circuit Judges, and NETERER, District Judge.
   WILBUR, Circuit Judge.

This is an action brought to recover on a policy of fire insurance. At the time the building covered by the insurance policy was burned the property was vacant and had been vacant for several months, from March, 1929, to August 11, 1929, the date of the fire. The policy, ■ a statutory standard form used in California (Stat. of Cal. 1909, p. 404), provided as follows: “Matters suspending insurance. Unless otherwise provided by agreement endorsed hereon or added hereto this company shall not be liable for loss or damage occurring * * * (f) while a building herein described whether intended for occupation by owner or tenant is vacant or unoccupied beyond the period of ten (10) consecutive days., * * * Such suspension shall not extend the term of this policy nor create any right for refund of the whole or any portion of premium, nor affeet the respective rights of cancellation.” Id. 406.

The question presented by the record is whether or not the occurrences at the time of an assignment of this policy from the previous owner to the appellee, who had purchased the property, and of the indorsement upon the policy of a rider recognizing such transfer and assignment, constitute a waiver of such provision in the policy or raise an es-toppel against the appellant which preclude it from taking advantage of the fact that no vacancy permit was indorsed upon the policy*

It is also contended that the provision of the policy with reference to the vacancy of the premises was waived, by reason of the fact that more than ten days after the building became vacant a small fire loss occurred, and the appellant settled the loss without, taking advantage of the fact that the building was vacant.

The ease was tried before a jury and the error presented here by the appellant for our consideration is the denial of appellant’s motion to instruct the jury to return a verdict for the appellant Insurance Company.

The testimony as to the occurrences involved is conflicting, but the action of the court in refusing to instruct the jury as requested must be determined from the viewpoint of the evidence most favorable to the plaintiff-appellee. Plaintiff testified that at the time of the transfer of the property to him he took the fire insurance policy, theretofore issued to the vendor, to Mrs. Johnson, a local agent of the appellant Insurance Company, residing at Clovis, Cal., and asked her to place an indorsement upon the policy recognizing transfer of ownership. This was done. He testified that at that time he told the agent that Mr. Rough, the previous owner, intended to move out of the building soon; that his daughter was sick and could not be moved then, but that the building would soon become vacant; that he then asked her if there was any necessity of attaching anything to that policy to keep it in force. She said, “No> not in an incorporated town with fire protection.” Shortly thereafter, on March 18, 1929, the property became vacant; that he did not make an application for a vacancy permit, “Because she told me it was not necessary to have a vacancy clause on there. I knew at that time that Clovis was an incorporated city and had fire protection.” The witness stated that he was familiar with th'e-terms of the policy above referred to.

The effect of the indorsement of the assignment on the policy by the agent of the Insurance Company was to create a new contract between the Insurance Company and the appellee. Lee Blackmore, Inc., v. Lewelling (C. C. A.) 281 F. 962; Wilms v. N. H. Fire Ins. Co., 194 Mich. 656, 161 N. W. 940. It will be observed that the oral agreement between the parties, as testified to' by the appellant, is in direct conflict with the express terms of the written policy. The policy provided that the insurance was suspended and not in force if the building were vacant more than ten days, while the oral agreement was to the effeet that the policy was not suspended but continued in force during a longer vacancy. The action is brought not upon the policy as written, but upon the verbal agreement or understanding between the agent of the company and the owner of the property insured at the time the written contract became effective as between them, as constituting a waiver of the written agreement, or as raising an estoppel against enforcing its provisions. Some contention is made in the briefs concerning the claim that the conversation referred to occurred after the in-dorsement of the assignment had been made upon the policy, and that therefore the subsequent conversation amounted to a waiver of the condition in the policy as theretofore issued. But we think that the evidence shows that the written and oral agreements were contemporaneous and should be considered as one transaction, regardless of whether the physical possession of the policy had passed from the agent to the appellee. It is conceded that a written agreement cannot be modified or affected by a contemporaneous oral agreement between the parties, conflicting with the terms of the writing, and this is the statutory law in California. (Cal. Code of Civ. Proc., § 1856.) That section is as follows: “An agreement reduced to writing deemed the whole. When the terms of an agreement have been reduced to writing by the parties, it is to be considered as containing all those terms, and therefore there can be between the parties and their representatives, or successors in interest, no evidence of the terms of the agreement other than the contents of the writing, except in the follow? ing eases. * * ' ” (The exceptions have no relation to the matter now under consideration.)

In a recent ease before the Supreme Court (Lumber Underwriters v. Rife, 237 U. S. 605, 35 S. Ct. 717, 59 L. Ed. 1140) it had occasion to consider an alleged waiver of a warranty in the policy requiring a clear space of 100- feet around the lumber which had been insured, arising from the knowledge of the agent of the insurance company that such space did not exist. In dealing with that subject, the Supreme Court, speaking through Mr. Justice Holmes, stated the rule as follows: “When a policy of insurance is issued, the import of the transaction, as everyone understands, is that the document embodies the contract. It is the dominant, as it purports to be the only and entire, expression of the parties’ intent. In the present case this fact was put in words by the proviso for the indorsement of any change of terms. Therefore when, by its written stipulation, the document gave notice that a certain term was insisted upon, it would be contrary to the fundamental theory of the legal relations established to 'allow parol proof that at the very moment when the policy was delivered that term was waived. It is the established doctrine of this court that such proof cannot be received. Northern Assur. Co. v. Grand View Bldg. Ass’n, 183 U. S. 308, 22 S. Ct. 133, 46 L. Ed. 213; Northern Assur. Co. v. Grand View Bldg. Ass’n, 203 U. S. 106, 107, 27 S. Ct. 27, 51 L. Ed. 109, 111; Conn. Fire Ins. Co. v. Buchanan, 141 F. 877, 883, 73 C. C. A. 111, 4 L. R. A. (N. S.) 758. See Penman v. St. Paul Fire & Marine Ins. Co., 216 U. S. 311, 30 S. Ct. 312, 54 L. Ed. 493; Aetna Life Ins. Co. v. Moore, 231 U. S. 543, 559; 34 S. Ct. 186, 58 L. Ed. 356, 366. There is no hardship in this rule. No rational theory' of contract can be made that does not hold the assured to know the contents of the instrument to which he seeks to hold the other party. The assured also knows better than the insurers the condition of his premises, even if the insurers have been notified of the facts. If he brings to the making of his contract the modest intelligence of the prudent man, he will pereeive the incompatibility between the requirement of 100 feet clear space and the possibilities of his yard, in a ease like this, and will make a different contract, either by striking out the clause or shortening the distance or otherwise, as may be agreed. The distance of 100 feet that was written into this policy was not a fixed, conventional formula that there would be trouble in changing, if the insured would pay what more, if anything, it might cost. Of course, if the insured can prove that he made a different contract from that expressed in the writing, he may have it reformed in equity. What he cannot do is to take a policy without reading it, and then, when he comes to sue at law upon the instrument, ask to have it enforced otherwise than according to its terms. The court is not at liberty to introduce a short cut to reformation by letting the jury strike out a clause.”

The decision of the Supreme Court in this ease cites with approval our decision in Kentucky Vermillion M. & C. Co. v. Norwich Union Fire Ins. Co., 146 F. 695, 700, wherein this court refused to consider evidence that the insurance company knew that the property was idle at the time the policy was issued, as a basis for the contention that the provision of the policy with reference to- the plant being idle for more than thirty days was waived. It is clear from a consideration of this late decision by the Supreme Court, and a consideration of the decision of the Circuit Court of Appeals overruled by it (Rife v. Lumber Underwriters, 204 F. 32), and the decision cited in support thereof (Kentucky Vermillion M. & C. Co. v. Norwich Union Fire Ins. Co., 146 F. 695, supra), that the Supreme Court is definitely committed to the proposition that mere knowledge by the insurance company of conditions which would constitute a breach and forfeiture' thereof at the time of its issuance, does not operate as a waiver of the express terms of the written policy.

Does the statement of the agent in direct conflict with the known terms of the policy as to the result of future conditions not yet arisen change the principle involved, so that in such case there is a waiver or an estoppel? It is to be noted that promises and pre>dietions or opinions of agents as to the result of a breach of the terms of the written policy are more definitely opposed to the rule prohibiting a modification of a written agreement by parol than are agreements or waivers of contemporaneous breaches of the contract, where the courts hold that there is a waiver of existing conditions by the issuance of policy with knowledge of such conditions, for the reason that otherwise the insurance would be void ab initio and the premium would be accepted without any consideration therefor. This difference is stated by the Appellate Court of Illinois in Phoenix Ins. Co. v. Maxson, 42 Ill. App. 164, 171, as follows:

“There is a clear distinction between a case of verbal modification of a written condition contained in a policy of insurance with reference to a condition of things which exist at the time, and a ease of such modification with reference to the future conduct of the parties. If, when the policy is issued, the property is vacant, and the agent states to the assured, who has no knowledge of nor opportunity to know the limitation of the agent’s authority, that the vacancy will not affect the liability, the policy is treated as having been issued with the vacancy clause stricken out.
“But if, when the policy issued, the property is occupied, and the agent states orally that as to future occupancy the vacancy condition need not be complied with, the statement is not binding and can not be relied upon, because the assured is notified by the language of the policy, that vacancy without permission will avoid the policy, and has the opportunity of protecting himself if he desires to have the property vacated.
“In this case not only was the modification contended for with reference to the future conduct of the assured, other and different from the then existing state of affairs, but was made by an agent whom the assured had been notified had not authority to.make such modification. Where the assured is notified of the limitation of the authority of the agent, the former can not rely upon the statements of the latter in excess of his authority. Wood on Insurance (2d Ed.) 841, 844, 845; May on Insurance (3d Ed.) secs. 126, 127; Guernsey v. Ins. Co., 17 Minn. 111 [Gil. 83]; Bouton v. Ins. Co., 25 Conn. 542; [Union Mut. L.] Ins. Co. v. Mowry, 6 Otto [96 U. S.] 544 [24 L. Ed. 674].”

To the same effect is the decision in McNierney v. Agricultural Ins. Co., 48 Hun (N. Y.) 239.

In Hartford Fire Ins. Co. v. Davenport, 37 Mich. 609, the Supreme Court of Michigan pointed out this distinction and refused to recognize such an agreement, statement, or promise with reference to a future vacancy. We quote from that decision as follows:

“ * * * it is claimed in support of the ruling below, that the company is estopped from relying on this forfeiture. * * *
“This court has held in several cases that there may be waivers or estoppels which do away with the written conditions of a policy by reason of the conduct of the insurers inconsistent with reliance upon them. Peoria M. & F. Ins. Co. v. Hall, 12 Mich. 202; Westchester Ins. Co. v. Earle, 33 Mich. 144; North American Fire Ins. Co. v. Throop; 22 Mich. 147 [7 Am. Rep. 638]; Aurora F. & M. Ins. Co. v. Kranich, 36 Mich. 289.
1 , “These cases, so far as they apply at all, relate to a knowledge by the company of existing facte at the time of their action, when such action would not be consistent with any idea that they were to be discharged from liability by reason thereof.
“But in this ease the vacancy concerning which the parties conversed, if there was any such conversation, was one contemplated in the future, and the stipulation or understanding, if it amounted to anything, was an execu-tory contract, intended to form a part of the contract of insurance. This being so, the doctrine cannot be admitted that any part of the completed contract can rest in parol. The policy was the conclusion of the bargain, and its acceptance would exclude any-parol promises inconsistent with it. There is no resemblance between a parol variance of a written contract and a waiver of a condition after it has beeome binding on the parties.”

To the same effect, with reference to a vacancy, is Hartford Fire Ins. Co. v. Webster, 69 Ill. 392; Rogers v. Phenix Ins. Co., 121 Ind. 570, 23 N. E. 498. There are authorities to the contrary, but our Supreme Court in the case of Northern Assur. Co. v. Grand View Bldg. Ass’n, 183 U. S. 308, 22 S. Ct. 133, 46 L. Ed. 213, refuse, in an action at law, to allow proof of an oral agreement or statement by the agent made at the time the policy was issued with reference to future conditions. To the same effect: N. Y. Life Ins. Co. v. McMaster (C. C. A.) 87 F. 63, 69; Carpenter v. Providence Wash. Ins. Co., 16 Pet. 495, 10 L. Ed. 1044; Fitchburg Sav. Bank v. Amazon Ins. Co., 125 Mass. 431; Candee v. Citizens’ Ins. Co. (C. C.) 4 F. 143; United Firemen’s Ins. Co. v. Thomas (C. C. A.) 82 F. 406, 47 L. R. A. 450; Gray v. Germania Fire Ins. Co., 155 N. Y. 180, 49 N. E. 675.

It will be observed that the policy in the case at bar does not provide for a forfeiture in the event that the building is vacant^ It merely undertakes to insure the building while it is occupied and during the first ten days of any period of vacancy. The policy says nothing about a vacancy permit. It makes the obligation of the company during vacancy dependent upon a written modification of the contract subsequently agreed to and indorsed on or added to the policy. It provides that the building is not insured when vacant for more than ten days. The effect of the vex'bal agreement was exactly the opposite. There was no waiver of a forfeiture, because the policy contained no provision for a forfeiture.

In addition to the foregoing considerations the policy expressly provided that it could not be modified except by written agreement, as follows: “This policy is made and accepted subject to the fox*egoing stipulations and conditions and those hereinafter stated, which are hereby specially x’eferred to, and made part of this policy, together with such other provisions, agreements or conditions as may be endorsed hereon or added hereto, and no officer, agent, or other representative of this company shall have power to waive any provision or condition of this policy except by writing endorsed hereon or added hereto, and no person, unless duly authorized in writing, shall be deemed the agent of this company.” (Id., Stats. 1909, p. 404, 405.)

In Christian & Brough Co. v. St. Paul, F. & M. Ins. Co., 5 F.(2d) 489, 490, the Circuit Court of Appeals for the Fifth circuit, dealing with a similar clause, held that such a provision was valid and binding upon the insurer, stating: “Whatever may be the rule in other jurisdictions, the Supreme Court of the United States is firmly committed to the view that, where a policy of insurance requires that a waiver by the insurer’s agent be in writing, it is not permissible to show a waiver by parol agreement or course of dealing with its agent.”

The same rule is applied by the Court of Appeals for the Sixth circuit in Home Ins. Co. v. Scott, 46 F.(2d) 10. The decision is to the same effect in Fire Ass’n of Philadelphia v. Nime, 9 F.(2d) 28, by the Circuit Court of Appeals of the Fifth circuit. To the same effect is the decision of the Circuit Court of Appeals of the Fourth circuit in Surratt v. Fire Ass’n of Philadelphia, 43 F.(2d) 467, 470, as follows: “ * * * it is settled law in the federal courts that, where a policy provides that no officer or agent of the company shall have power to waive any of its terms or conditions except by written indorsement, knowledge on the part of the agent does not waive breach of the conditions nor estop the company from insisting upon forfeiture because of such breach.”

In Hartford Fire Ins. Co. v. Nance (C. C. A. 6 ) 12 F.(2d) 575, there was under consideration the válidity of an oral waiver due to the fact that the agent of the company was aware of the breach of the contract at the time of the issuance of the policy. It was held that although the law of the state in which the eoritraet was written, as declared by its courts, recognized such a verbal waiver or estoppel, that in the federal courts, the question being one of general law, the rule was otherwise.

In Northern Assur. Co. v. Case (C. C. A.) 12 F.(2d) 551, 552, it was said: “In the federal courts, it is well settled that where, as in this ease, the policy provides that no officer or agent shall have power to waive any of its terms, except by written indorsement, mere knowledge on the part of the agent issuing the policy does not waive breach of the conditions therein contained.”

It seems clear from the foregoing authorities that the agreement of the agent, with reference to prospective vacancies being oral, and in direct conflict with the terms of the policy, was not binding upon the company, not only for the reason that evidence of an oral agreement contemporaneous with and in contradiction of a written agreement is not admissible to vary the terms of a contract, but also because it further appears from the contract itself that the agent of the company was not authorized to amend or vary the contract, except by a writing attached thereto or endorsed thereon.

The difference between the waiver of a past transaction and a future one may be illustrated by the situation presented in the case at bar arising from the payment of the first loss. The company paid such a loss under the policy occurring after more than ten days of vacancy. This payment, if made with the knowledge of that fact, as is contended by the appellant, was a waiver of the fact of vacancy and the payment made with full knowledge of the situation could not be recovered because of such waiver, but it does not follow that because the company was willing to pay a small loss during the period of vacancy beyond that specified in the policy, as the' appellee contends, that it was thereby bound to pay a larger loss after a longer period of vacancy, or that it was thereby estopped from defending a claim made for the destruction of the building by fire, upon the ground that the policy did not cover the -loss. We are not here dealing with the waiver of a past breach of the policy which would invalidate it in the future and leave the property without insurance, unless the waiver was held to estop the Insurance Company from subsequently setting up the very breach it had previously waived, as in the ease of Arnold v. American Ins. Co., 148 Cal. 660, 665, 84 P. 182, 25 L. R. A. (N. S.) 6, cited by appellee, and in Lamberton v. Conn. Fire Ins. Co., 39 Minn. 129, 39 N. W. 76, 1 L. R. A. 222. This is not a case where the Insurance Company, by failure to terminate the contract, or declare a forfeiture, continued to enjoy benefits it would not otherwise be entitled to retain, such as was the situation considered by the Supreme Court in Union Mut. L. Ins. Co. v. Wilkinson, 13 Wall. (80 U. S.) 222, 20 L. Ed. 617, for the premium paid in the ease at bar did not cover periods of vacancy beyond ten days.

Judgment reversed.


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    TITLE GUARANTEE & TRUST CO. v. UNITED STATES.
    No. 6368.
    Circuit Court of Appeals, Ninth Circuit.
    June 1, 1931.
    Rollin L. McNitt and John A. Cronin, both of Los Angeles, Cal., for appellant.
    Samuel W. McNabb, U. S. Atty., and Harry Graham Balter, Assst. U. S. Atty., both of Los Angeles, Cal.
    Before WILBUR and SAWTELLE, Circuit Judges, and ST. SURE, District Judge.
   ST. SURE, District Judge.

Appeal in an abatement ease under.the National Prohibition Act, attacking a decree of the District Court closing the premises for the period of one year.

The facts are undisputed. From the agreed statement presented under Equity Rule 77 (28 USCA § 723), it appears that the premises sought to be enjoined were used as a restaurant known as Tony’s Café, and operated by the respondent Tony Panzieh at 901-905 East First street, Los Angeles, Cal., that the respondents John Arkovieh, Otto Meyers, and George Gereh were employees of said Tony Panzieh at said café, and that the respondent and appellant, Title Guarantee & Trust Company, a corporation, was the owner of the real property and building upon and in which the café was situated, as trustee under a deed of trust.

It is admitted that liquor was sold in violation of law on said premises on six specific dates; that on numerous other dates the proprietor of said premises kept, bartered, and sold on said premises for beverage purposes different quantities of intoxicating liquors, and that the said respondents and their employees in the regular course of their unlawful business solicit, take, and accept orders for the sale of intoxicating liquors for beverage purposes as defined in the National Prohibition Act (title 2, § 1 [27 USCA § 4]); that the said Tony Panzieh has been convicted in the federal court at Los Angeles, Cal., on one occasion prior to the time the above premises were rented by the Title Guarantee & Trust Company to said Tony Panzieh, for violation of the National Prohibition Act at the said premises; that the reputation of said premises is that of a place where intoxicating liquors are sold in the regular course of business; that the Title Guarantee & Trust Company, a corporation, respondent and appellant herein, after being fully advised of the unlawful use to which said premises were being put, delayed unreasonably to take action to prevent the continuance and repetition of said unlawful acts.

The facts set out in the opinion of the learned trial judge are also admitted as true and made a part of the agreed statement. Quoting from the opinion:

“At the trial it was agreed on the part of the defendants, including Title Guarantee and Trust Company, trustee owner, that witnesses present and which the Government intended to call, would testify to the facts as they were alleged in the bill of complaint. In the bill a series of violations of the National Prohibition Act were set forth. In addition thereto the Government offered evidence showing that a few days before the trial there had been further sales of liquor made at the place designated. This place was used by the defendant Tony Panzieh as a cafe or restaurant. It appears from the evidence that for a considerable time the place has been known among police officers having to do with investigations of prohibition violations as one where both beer and whisky could be readily obtained. There is no question made, as opposed to the Government’s showing, but that Panzieh openly and continuously sold liquor in violation of law. The Government has asked that the place be closed for a period of one year, as the prohibition act provides may be done. The Title Guarantee and Trust Company, which, as trustee, represents the ownership interest, has urged that there is no occasion for closing the place, because the tenant had closed his doors and was about to move from the premises. It seems that he did not close until a raid was made by the officers a few days before the trial, at the time the latest violations were detected.
“As -to whether it is probable that the owner may permit violations in the future should be judged by its conduct in the past. The owner was notified in January, 1929, by the district attorney of Los Angeles county, that unlawful acts in violation of the state prohibition law were being committed on the premises. It was later given the names of police officers who would be available as witnesses to substantiate the charge. No action was taken by-it until May 3, 1929; when it commenced an unlawful detainer proceeding to terminate the lease as against the tenant Panzieh. This case was continued on stipulation and orders, and final judgment was not entered until February 7, 1930. Meanwhile, although an unlawful detainer action under the state law is a summary proceeding, capable of being quickly brought to a close, and during which time the lessor relies upon a right to damages rather than the collection of rental, the lessor continued to collect rent under a conditional stipulation made with the tenant, covering the whole period of time up to the date when it secured judgment, or approximately that date. * 4
“All of these matters considered, it seems that a decree closing the premises for a period of one year, as section 22 of title 2 of the National Prohibition Act (27 USCA § 34) provides, will be neither harsh nor inequitable.”

In view of the contention of appellant, which will hereafter be noted, we have thought it proper to quote at some length the facts as agreed to.

The court made its decree in part as follows :

“And it being by the court determined that the Title Guarantee and Trust Company, a corporation, after being fully advised of the unlawful use to which said premises were being put, as in the complaint herein, charged, delayed unreasonably to take action to prevent the continuance and repetition of the said unlawful acts, as more particularly set forth in the written opinion filed herein, and that such owner is likely to continue to be negligent in the manner aforesaid, if the possession of the premises is returned to the said Title Guarantee and Trust Company, a corporation, and said premises are permitted to be used as a restaurant or a place where food and beverages are dispensed.
“It is hereby ordered and decreed that said premises shall be closed for the period of one year.
“The option, however, is given to said Title Guarantee and Trust Company, if it consents to be bound by the restriction now stated, to have the possession of said premises returned to it upon giving bond in the sum of one thousand dollars ($1,000), as provided in the National Prohibition Act of October 28, 1919, to the effect that any tenant or lessee to whom the said respondent, Title Guarantee and Trust Company, may rent the said premises within the year next succeeding the date of this decree, shall not violate the provisions of the National Prohibition Act or of any other state or federal law relating to intoxicating liquors, such premises may be reopened and used for the purpose of a legitimate business, not including that of a restaurant, cafe or any business where food, drinks or beverages of any kind are sold or dispensed.
“That upon the furnishing of said bond, which shall contain the provisions above mentioned, the closure sign heretofore ordered to be placed on said premises may be removed.”
“Appellant does not question the evidence,” quoting from its brief, “or the sufficiency thereof to support the decision made and entered.” It is the portion of the decree giving appellant an option to open the premises under bond which is objected to; the contention being that the court, having exercised its discretion and allowed the posting of the bond to reopen the premises, had no authority to impose the additional condition and restriction that the premises should be used for a legitimate business, not including that of a restaurant, café, or any business where food or drinks or beverages of any kind are sold or dispensed.
Section 22 of title 2 of the National Prohibition Act, title 27, USCA, upon which the decree was based, provides that, upon judgment ordering the nuisance to be abated, the court may order that the premises shall not be occupied or used for one year thereafter; “but the court may, in its discretion, permit it to be occupied or used if the owner, lessee, tenant, or occupant thereof shall give bond” as provided “and conditioned that intoxicating liquor will not thereafter be manufactured, sold, bartered, kept, or otherwise disposed of therein or thereon, and that he will pay all fines, costs, and damages that may be assessed for any violation of this chapter upon said property.”

Appellant relies upon Crocker First Federal Trust Co. v. U. S. (C. C. A.) 38 F.(2d) 545; U. S. v. Pepe (C. C. A.) 12 F.(2d) 985, and Schlieder v. U. S. (C. C. A.) 11 F.(2d) 345, 348.

The Pepe Case was cited by this court in the Crocker Case. In neither of these cases was there an admission and finding that' the owner of the premises was at fault. We think both eases are distinguishable, but, because of the conclusion we have reached herein, it is unnecessary to discuss them. In the Sehlieder Case the following apt language, applicable here, is used: “It was clearly the intention of Congress, in enacting the provision as to bond [referring to the bond provided for by section 34, supra], to give an innocent party the absolute right to recover the use of his property on complying with that provision.”

In the instant case appellant admits, the trial court found, and the decree declares “that the Title Guarantee & Trust Company, a corporation, appellant herein, after being fully advised of the unlawful use to which said premises were being put, * * * delayed unreasonably to take action to prevent the continuance and repetition of the said unlawful acts.” It is therefore quite clear that the trial court did not abuse its discretion in ordering the premises closed for a year. It was the logical thing to do; and, having so decreed, it further proposed to appellant, in the so-called option, that it might reopen its premises for a legitimate specified business. Here was a gratuitous concession to appellant, of which it now ungratefully complains.

This being an appeal in an equity suit, the whole ease is before us, and upon due consideration we feel constrained to decide it upon its merits.

The decree is therefore modified by striking therefrom the following language:

■ “The option, however, is given to said Title Guarantee and Trust Company, if it consents to be bound by the restriction now stated, to have the possession of said premises returned to it upon giving bond in the sum of one thousand dollars ($1,000) as provided in the National Prohibition Act of October 28, 1919, to the effect that any tenant or lessee to whom the said respondent, Title Guarantee and Trust Company, may rent the said premises within the year next succeeding the date of this decree, shall not violate the provisions of the National Prohibition Act or of any other state or federal law relating to intoxicating liquors, such premises may be reopened and used for the purpose of a legitimate business, not including that of a restaurant, cafe or any business where food, drinks or beverages of any kind, are sold or dispensed.
“That upon the furnishing of said bond, which shall contain the provisions above mentioned, the closure sign heretofore ordered to be placed on said premises may be removed.”

The decree as modified is affirmed.


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    STROM v. UNITED STATES.
    No. 6351.
    Circuit Court of Appeals, Ninth Circuit.
    June 1, 1931.
    H. Sylvester Garvin, of Seattle, Wash., •for appellant.
    Anthony Savage, U. S. Atty., and Jeffrey Heiman, Asst. U. S. Atty., both of Seattle, Wash.
    Before WILBUR and SAWTELLE, Circuit Judges, and ST. SURE, District Judge.
   WILBUR, Circuit Judge.

Appellant was indicted upon three counts for violation of the National Prohibition Law (27 USCA). In pursuance of a stipulation, he was tried by the court sitting without a jury, and was found guilty. He appeals from the judgment of conviction solely upon the ground that the evidence against him had been unlawfully procured in violation of the Fourth- and Fifth Amendments of the .Federal Constitution and that his petition, to suppress this evidence, addressed to the court, was improperly denied.

It appears from the evidence that at about 1 p. m. on September 23, 1930, the day the appellant was arrested, the prohibition officers were notified by an anonymous telephone message that a still was being operated in the premises known as 1827 Terry avenue, in Seattle, Wash. The deputy prohibition administrator, W. H. Kinnard, directed a federal prohibition agent, Leonard Regan, to visit the premises and make a report. This he did at about 5:30 p. m. He found two large frame buildings, No. 1827 and No. 1825 Terry avenue, with a plank walk between them. When standing on this walk he could smell the odor of mash coming from the upstairs of No. 1825, and he could detect the odor of distilled liquors. He reported to the deputy prohibition administrator that he believed a still was being operated in the attic of 1827 Terry avenue. At 6 p. m. Kinnard and Regan visited the premises. When they arrived, as they testified, they “detected a distillery by the smell of mash and whiskey emanating from 1827 Terry avenue.” They seereted themselves iff an abandoned automobile and watched the premises until about 10 p. m., when they saw the light go off in apartment No. 6 in which the still was believed to be located. Shortly after, two men came down the back stairs of 1827 Terry avenue, looked up and down the alley in the rear of the premises and all around, and then returned to the house. Five minutes later two men came out again; one, named Nelson, carrying a flashlight, and the defendant, Strom, who was in his stocking feet, carrying} a pasteboard carton such as bootleggers usually use, which he put into the rear of á Chevrolet coupó standing four or five feet from the automobile in which the officers were secreted. When spoken to by the officers and told they were federal officers, defendant Strom ran away and was brought back by the officers. He was not placed under arrest until he was overtaken by the officers and brought back to the Chevrolet car. The officers then told him they wanted the balance of “the stuff.” He gave them the key and showed them a shed in the rear of No. 1825 in which some whisky was stored. The officers then went upstairs on an outside stairway to an outside walk which extended across the rear of both buddings. From this walk, which they testified was open to the public, they looked through the open door of apartment No. 6 and saw several ten-gallon kegs covered with burlap; there were 20 barrels of mash and 90 gallons of whisky and a still there, and bottles and jugs all over the floor, and cartons similar to that already seized. They could see that the room was not used as a dwelling place. Defendant admitted the apartment was his, made no objection to the search, and assisted in it.

The primary question is whether or not the suspicious conduct of the defendant and his associate at the time and place justified his arrest and the search of the coupe. It is conceded by the appellant that if this arrest was justified that the subsequent search of the garage and apartment was justified and that the motion to suppress testimony properly denied. We have in this ease the concurrence of a number of elements tending to arouse suspicion of the commission of an offense in the presence of the officers, some of which are missing in the cases cited by counsel. Here we have information furnished the officers that a still was being operated on the premises in question. This information is confirmed by the observation of the officers and later by two officers who detect the odor of mash and intoxicating liquor. Later two men emerge from the premises acting suspiciously, and apparently desirous of ascertaining that the way was clear. These men return in a few minutes with a package such as was known by the officers to be used in the illicit transportation of liquor; one of the men is in his stocking feet, the other carries a flash-light; they place the package in the rear of the waiting Chevrolet, and immediately upon being accosted by the officers, and upon being informed of their official character, the defendant runs away. Flight is always an evidence of guilt and evidence thereof is received in the trial of criminal eases as some evidence tending to support a criminal charge. This evidence, supplemented by the observations of the officers as to the conduct of the defendant and the odor of liquor emanating from the premises, were considered by the trial court as sufficient to furnish a reasonable ground for them to suspect that a crime was being committed in their presence, thus justifying their arrest. The conclusion of the trial court is supported by substantial evidence and cannot be disturbed on appeal. Ex parte Morrill (C. C.) 35 F. 261, 267; Marron v. U. S. (C. C. A.) 8 F.(2d) 251; Id. (C. C. A.) 18 F.(2d) 218; Id., 275 U. S. 192, 48 S. Ct. 74, 72 L. Ed. 231.

Judgment affirmed.


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    ARIASI v. ORIENT INS. CO. et al.
    No. 6345.
    Circuit Court of Appeals, Ninth Circuit.
    June 1, 1931.

      Chauncey Tramutolo and George M. Naus, both of San Francisco, Cal., for appellant.
    Miller & Thornton, H. B. M. .Miller, and H. A. Thornton, all of San Francisco, Cal., for appellees.
    Before RUDKIN, WILBUR, and SAW-TELLE, Circuit Judges.
   WILBUR, Circuit Judge.

This is a second appeal to this court in the above-entitled case. We refer to our opinion on the first appeal for a statement of the facts. Orient Ins. Co. v. Ariasi (C. C. A.) 28 F.(2d) 579, 589. The first judgment rendered was in favor of the present appellant and against the appellees for the loss alleged to have been suffered by the appellant by reason of the fire which destroyed the property covered by insurance policies issued by the appellees. Numerous questions were presented by the appellees, based upon allegations that the provisions of the policy had been breached by the appellant by reason of the fact that at the time of the fire the hazard had been increased because of the revocation of a permit issued by the Prohibition Department of the federal government authorizing the appellant to manufacture and sell by permit the wine which was destroyed by the fire.

Upon appeal, the principal contention was that, by reason of the revocation of the permit, the wine was no longer property, and that by the destruction thereof appellant suffered no injury for which he could recover upon the policy. This court, however, held that, as the wine was lawfully acquired and lawfully possessed under permit in the first instance, “its mere possession after the cancellation of the permit was not unlawful, nor were all property rights therein lost,” citing Street v. Lincoln Safe Deposit Co., 254 U. S. 88, 41 S. Ct. 31, 65 L. Ed. 151, 19 A. L. R. 1548; Hazelwood Brewing Co. v. United States (C. C. A.) 3 F.(2d) 721. It was further held that, under section 25, tit. 2, of the National Prohibition Act (27 USCA § 39), if the wine in question was intended for use in violation of that act, or had 'been so used at the time of its destruction by fire, the appellant had no property rights therein and could not recover, citing Gonch v. Republic Storage Co., 245 N. Y. 272, 157 N. E. 136. It was further held that the order of the Department revoking the permit of the appellant was prima facie evidence of the facts there found, citing People ex rel. Copcutt v. Board of Health, 140 N. Y. 1, 35 N. E. 320, 23 L. R. A. 481, 37 Am. St. Rep. 522. The judgment was reversed because of the erroneous admission of evidence, and the case remanded to the trial court for further proceedings.' A new trial was had, without a jury, pursuant to written stipulation, and findings and judgment were rendered in behalf of the1 appellees here.

In view of the revocation of the permit, it was said in our former opinion: “The vital; issue in the ease, in our view, was whether,' at the time of its destruction by fire, the wine was intended for use in violation of the National Prohibition Act," or had been so used. * » %

It was stipulated at the trial that on De-’ eember 26, 1924, an order was made by the Prohibition Department of the United States Government canceling the permit of the appellant to manufacture and sell wines for nonbeverage purposes, and to sell the same for sacramental and other nonbeverage purposes, pursuant to permits to purchase; that said permit was canceled on the ground that appellant had illegally disposed of wine in violation of the terms of his permit and the National Prohibition Act and that he illegally possessed the same.

Upon the trial, the appellees offered in evidence the order of the department which revoked appellant’s permit. This order, issued by the federal prohibition director December 26, 1924, revoked and canceled permit No. Calif. A62, issued to Clemente Ariasi, upon the ground therein set forth, viz.: “For the reason that it was decided at a recent hearing that you had illegally disposed of wine in violation of the terms of your permit and the National Prohibition Act and that you illegally possessed the same.”

In addition to this formal order of revocation, appellees offered in evidence the findings of fact and conclusions of law and recommendations of the assistant prohibition director upon which said order of revocation was based. These findings are to the effect that federal prohibition agents went to appellant’s winery and purchased wine in the kitchen of his house from the appellant himself. Seareh warrants were issued upon this testimony, and intoxicating liquor was discovered in the kitchen of appellant’s residence, which was held in violation of the National Prohibition Act. The findings recited the fact that the appellant offered testimony to the effect that he himself was not present on the day of the alleged purchase of intoxicating liquor and therefore the government agent was mistaken. These findings further recited: “He did not deny, however, that such purchases were made except by implication that in so far as he was not there the agent could not have purchased it from him, and therefore there was no purchase. * * * Mr. Ariasi did not deny that certain intoxicating liquors which were found in the kitchen of the residence were actually found there but claimed in so far as he had a bonded winery that this liquor did" not come from the bonded premises and therefore was not held in violation of his permit.”

1 In making the recommendation, it was said: “Although there is some question about the purchase having been made from the proprietor himself, it does not appear that there was not an actual purchase made at the residence of Mr. Clemente Ariasi, the permittee in this ease, and that certain other intoxicating liquors were found at a later date upon investigation by virtue of a search warrant.”

It was therefore concluded that there had been a violation of the National Prohibition Act in connection with the premises owned by the appellant, and that such violation was sufficient to establish bad faith on the part of the permittee. Upon receipt of these findings, conclusions, and recommendations of the assistant prohibition director, the Prohibition Commissioner wrote to the federal prohibition director in San Francisco with reference thereto, in part as follows:

“In support of the charges contained in the citation, the presenter placed in the record evidence that on January 19; 1924, Federal Agents purchased two glasses of wine in the residence of the respondent, which residence is located about one hundred feet from the bonded winery premises. This purchase of wine was witnessed by informant, Leon J. Henrotte. A search warrant was procured upon the evidence aforementioned, and upon searching the premises a quantity of wine was found in the kitchen of the residence.
“The respondent offered evidence to the effect that he was not at his residence at the time the alleged sale was made, but that he was in San Francisco, some fifty miles distant. The respondent claimed that the liquor seized at the time his residence was raided consisted of wine he possessed before prohibition. The respondent claimed his case was dismissed in the United States District Court at Sacramento, as the seareh warrant was dated some two months after the date of the alleged purchase.
“The hearer recommended the revocation of the permit. This recommendation was approved by you. Tour recommendation is concurred in, and you are directed to notify the winemaker that his permit has been revoked. A copy of such notification should be forwarded to this office immediately.”

In rebuttal of this prima faeie case, the appellant testified that the winery was 175 or 200 feet away from the kitchen at his residence; that he had some wine in his house, separate from the wine in the bonded winery; that the wine he had in the house had been kept separate from the wine in the winery ever since the prohibition law went into effect; that the wine in the house was all tax paid, and the canceled stamps were on the barrels; that when the prohibition law went into effect he had fifteen or sixteen barrels of fifty gallons each of that wine in his house, separate from the wine in the bonded -winery; that he kept that wine in the house for his own personal use; that it was not wine that he had made himself, but that he had bought from other people before' prohibition; that he never took any wine from the bonded winery for his own personal use and never had any of the bonded winery wine in his house. He further testified that on the day the prohibition officers claim to have bought wine in his house he was work-, ing in San Francisco (the winery was located in Santa Rosa, Cal.); that he had locked the winery before he left and had the key in his pocket; that his house was closed and nobody could get in; that he had never sold wine without a permit, and had never violated the law. > ,

The trial court entered judgment that plaintiff take nothing by his action. It appears from the memorandum opinion of the trial court in the record that the trial court was of opinion that the prima faeie ease established by the revocation of appellant’s permit was not overcome by appellant’s evidence. While we have referred to the opinion as indicating that the trial court discredited the testimony of the appellant, this result is to be inferred also from the judgment. The appellant concedes, as he must do in view of our previous decision, that the order revoking the permit establishes prima, faeie that the liquor destroyed by the fire in question was illegally possessed, and hence not' property within the meaning of the law and the insurance policy. But he contends that this presumption merely required him to go forward with his proof, and that, having done so, the presumption is at an end, citing Western & A. R. R. v. Henderson, 279 U. S. 639, 642, 49 S. Ct. 445, 73 L. Ed. 884; Mobile, etc., R. Co. v. Turnipseed, 219 U. S. 35, 43, 31 S. Ct. 136, 55 L. Ed. 78, 32 L. R. A. (N. S.) 226, Ann. Cas. 1912A, 463. The revocation of the permit upon the ground stated, in the absence of other testimony, established the fact that the liquor was illegally possessed by appellant. The question is whether or not this evidence is overcome by the affirmative evidence introduced by the opposing party. • In this connection, appellees seem to admit that the prima faeie case is met and overcome by adverse testimony, but point out that they do not rely1 wholly upon the prima faeie ease arising from the order of revocation itself, but that this proof has been supplemented by the findings of the assistant prohibition director, approved and adopted by the prohibition director, which disclose the facts upon which the order was based and show that an illegal sale of intoxicating liquor had been made by the appellee upon the premises involved herein. This record discloses that prohibition agents went to this “winery” and purchased wine, and that they made purchases from the permit-tee himself in the kitchen of his residence, about 100 feet from the bonded -winery premises.

The question for our consideration then is, ■' Did the testimony of the appellant, directly controverting this prima faeie evidence of illegal possession, require the tria-l court, as a matter of law, to find the facts to be as he testified them to be? Although it is a fundamental rule of law that a trial court is not required to accept the testimony of any -witness as true, but must weigh the testimony of such witness in connection with all the other evidence in the case and determine the truth, in the absence of all contradictory evidence and any inherent improbability in the testimony, the court cannot arbitrarily reject the testimony of a witness whose testimony appears credible. It is unquestionably true that, if the witnesses who appeared before the assistant prohibition director and testified as above indicated had appeared before the court on the trial qí this action and had again so testified, their testimony, being in direct conflict -with that of the appellant, would sustain the judgment. They did not testify. The record admitted is not primary evidence of the truth of the testimony therein set forth, nor of the facts stated in the record. It is the official action canceling the permit and declaring the possession unlawful that gives rise to the presumption that the cancellation is based upon evidence of the unlawful act of the party, as set forth, in the order or proceedings. In the absence of any other testimony, the court must accept as true the order of cancellation and the implications of unlawful possession arising therefrom. B.ut as stated in our former opinion, the mere cancellation of the permit does not render thenceforth unlawful the possession of the wine manufactured for sale under the permit, or prove the continued possession to be unlawful and contraband. It is necessary to show an intent to use the same unlawfully. To do this, it is contended that the record before the prohibition officers showed a sale in violation of law, and consequently it is claimed, in effect, that the evidence before the prohibition officers having established one sale before the permit was canceled, in violation of the terms thereof, we should infer that the wine was held after the permit was canceled for the purposes of unlawful sale. The difficulty with this elaim is that, although this conclusion was required, in the absence of any evidence to the contrary, the prima facie effect of the revocation is dissipated by positive evidence to the contrary. It does not constitute evidence to be placed in the scale, and weighed, as against the positive evidence of the plaintiff to the effect that he did not intend to violate the law and had not done so. The question as to the effect of positive evidence controverting a disputable presumption has been recently before the Supreme Court of California in the case of Smellie v. Southern Pacific Co. et al., 269 P. 657, thrice reheard, 276 P. 338, 287 P. 343, 299 P. 529. It was there held that fee presumption that a person exercises due care for his own safety was substantive evidence to be weighed against the testimony introduced concerning his conduct, tending to contradict the presumption. See, also, Mar Shee v. Maryland Assurance Corp., 190 Cal. 1, 210 P. 269, and cases there cited. This conclusion, so far as it is predicated upon the statutory law of California, is not controlling in the federal courts, where the rule has been established to the contrary in Western & A. R. R. v. Henderson, 279 U. S. 639, 643, 49 S. Ct. 445, 447, 73 L. Ed. 884.

In that ease our Supreme Court, reversing a judgment of the Supreme Court of Georgia, held that a Georgia statute, providing that a railroad company should be liable for any damages done to persons or property by the running of its trains, unless the company should mate it appear that their agents had exercised all ordinary and reasonable care and diligence, “fee presumption in all cases being against the company,” raised a presumption that was unreasonable and arbitrary and violative of the due process clause of the Fourteenth Amendment. The decision in that case, in distinguishing therefrom the ease of Mobile J. & K. C. R. Co. v. Turnipseed, 219 U. S. 35, 31 S. Ct. 136, 55 L. Ed. 78, 32 L. R. A. (N. S.) 226, Ann. Cas. 1912A, 463, in which there was assailed, as arbitrary and in violation of the due process clause, a Mississippi statute which provided that proof of injury inflicted by the running of the locomotives or cars of a railroad company “shall be prijna facie evidence of the want of reasonable skill and care on the part of the servants of the company in reference to such injury,” states the rule recognized by our Supreme Court as to the legal effect of presumptions or inferences such as were provided for by the Georgia and Mississippi statutes, respectively. After quoting the Mississippi statute and stating that the Supreme Court had, in Mobile, etc., R. Co. v. Turnipseed, supra, held it valid, the Supreme Court in Western, etc., Co. v. Henderson, supra, quoted from the earlier case the following language: “The only legal effect of this inference [created by the Mississippi statute] is to cast upon the railroad company. the duty of .producing some evidence to the contrary. When that is done the inference is at end, and the question of negligence is one for the jury upon all of the evidence. * * * The statute does not * * * fail in due process of law, because it creates a presumption of liability, since its operation is only to supply an inference of liability in the absence of other evidence contradicting such inference.” Mobile, J. & K. C. R. Co. v. Turnipseed, 219 U. S. 43, 31 S. Ct. 136, 55 L. Ed. 78, 32 L. R. A. (N. S.) 226, Ann. Cas. 1912A, 463.

And in the later ease the Supreme Court went • on to say (279 U. S. 643, 49 S. Ct. 445, 447, 73 L. Ed. 884): “That case is essentially different from this one. * * * The Mississippi statute created merely a temporary inference of fact that vanished upon the introduction of opposing evidence. [Citing Mississippi eases.] That of Georgia as construed in this ease creates an inference that is given effect of evidence to be weighed against opposing testimony, and is to prevail unless such testimony is found by the jury to preponderate.”

These decisions are in accord with fee general rule. Thus, in Wigmore on Evidence (2d Ed. 1923) it is stated:

“Sec. 2091. The distinction, between presumptions ‘of law’ and presumptions ‘of fact’ is in truth the difference between things that are in reality presumptions (in the sense explained above) and things that are not presumptions at all. A presumption, as already noticed, is in its characteristic feature a rule of law laid down by the judge, and attaching to one evidentiary fact certain procedural consequences as to the duty of production of other evidence by the opponent. * * . *
“Nevertheless, it must be kept in mind that the peculiar effect of a presumption ‘of law’ (that is, the real presumption) is merely to invoke a rule of law compelling the jury to reach the conclusion in the absence of evidence to the contrary from the opponent.. If the opponent does offer evidence to the contrary (sufficient to satisfy the judge’s requirement of some evidence), the presumption disappears as a rule of law, and the case is in the jury’s hands free from any rule, * * * It is therefore a fallacy to attribute (as do some judges) an artificial probative force to a presumption, increasing for the jury the weight of the facts, even when the opponent has come forward with some evidence to the contrary.”

In Jones’ Commentaries on Evidence (2d Ed. 1926) it is said:

“Sec. 30. * * * We find that in some opinions presumptions are referred to as ‘evidence.’ The better reasoned authorities hold that a presumption is not evidence of a fact, but purely a conclusion, having no probative force, and designed only to sustain the burden of proof until evidence is introduced tending to overcome it.
“ ‘A presumption,’ it is said, ‘cannot in itself possess probative weight, but merely necessitates evidence to meet the prima facie case which it creates. When evidence is introduced rebutting the presumption, the presumption disappears, leaving in evidence the basic facts which are to be weighed.’ (Citing Stumpf v. Montgomery, 101 Okl. 257, 226 P. 65 [32 A. L. R. 1490].)”

Quotation is here made by that author from a Rhode Island case, in which it is, in part, said:

“A presumption is not evidence, and it has no weight as evidence. It only makes a prima facie case for the party in whose favor it exists. A presumption merely points out the party who has the duty of going forward. The party against whom the presumption operates has the burden of producing satisfactory evidence to rebut the presumption. When this has been done the presumption becomes inoperative, and is laid aside, and the ease proceeds as it would if no presumption had been invoked” — citing Colangelo v. Colangelo, 46 R. I. 138, 125 A. 285.
“Sec. 32. As shown in a preceding section, by the better-reasoned authorities, presumptions, including even the presumption of innocence, are not themselves' evidence. [Citing sec. 30, supra.] Courts have frequently remarked that presumptions are only intended to take the place of facts, and cannot be relied upon where the facts are shown; or that no presumption can stand in the face of facts. According to such authorities a presumption is an artificial thing, a’ mere house of cards, which one moment stands with sufficient force to determine an issue, but at the next, by reason of the slightest rebutting evidence, topples utterly out of consideration of the trier of facts. * * * ■ [Citing cases, including Canty v. Halpin, 294 Mo. 96, 242 S. W. 94, 97, in which it is said that “Presumptions are bats of the law, flitting in the twilight, but disappearing in the sunlight of actual facts.”]”

In the article on “Presumptions” in 9 Eneye. of Evidence, at page 885, it is said:

“There is some confusion in the eases upon the question whether a presumption is evidence and has probative force. Since the function of a presumption logically considered is merely to impose the burden of going forward with the evidence upon the party against whom it operates, when contrary evidence is adduced the presumption disappears, although the facts upon which it rested still remain as evidence in the ease. A presumption is therefore not evidence, nor is a so-called presumption of fact or mere inference of fact; it is merely the result of evidence.
“In some eases, however, it has been held that a legal presumption is evidence and has probative force as such even though its arbitrary legal character may have been destroyed by contrary evidence. These eases have been most frequently concerned with the presumption of innocence and instructions as to its force and effect. And some courts, while not regarding a presumption as evidence, nevertheless hold that it has a certain amount of probative force and is to be. considered along with the evidence and that it is not overcome by any competent evidence to the contrary, however slight” — citing eases.

In a marginal note to the above it is said:

“The better opinion seems to be that no disputable presumption of law is to be regarded as testimony which must necessarily be submitted to a jury, but its office is merely to determine upon which party the onus pro-bandi is laid. Spaulding v. Chicago & N. W. Ry. Co., 33 Wis. 582, in which the presumption of the improper construction or management of a locomotive arising from proof that it set a fire was held to- be overcome as a matter of law by uneontradieted evidence showing its proper construction and management. It t was contended that this presumption had the force and effect of testimony, and the question, therefore, whether contrary evidence was sufficient to overcome it was one for the jury and not for the court. It was held, however, that presumptions of law are different in this respect from presumptions of fact. Their weight and effect and the amount and character of the proof necessary to overcome them being questions for the court” — citing cases.
“The general presumption that public officers have faithfully executed the duties with which they are charged £is a mere arbitrary rule of law. It possesses no inherent probative force, and when met by opposing evidence is entirely destroyed.’ Blaco v. State, 58 Neb. 557, 78 N. W. 1056; see, also, Sternberger v. McSween, 14 S. C. 35.”
“A legal presumption is not evidence. It establishes a point when there is no testimony, and no inference of fact from the absence of testimony, and also when all the testimony is so balanced that the point is not decided by the testimony. State v. Pike, 49 N. H. 399, 443, 6 Am. Rep. 533.”

In Hunter Glover Co. v. Harvey Steel Products Corp., 3 F.(2d) 634, 639, Judge Ross of the District Court for the Western District of Tennessee held that the presumption (involved herein) of the regularity of the performance of official duty disappears when proof to the contrary is offered by either party.

In view of a new trial, it may be said that there is no evidence of the concealment by appellant of the fact that proceedings had been instituted to revoke his permit. The policy was issued by the agent in conformity with a custom covering many years without any questions being asked of the appellant. There is no indication that appellant knew that the insurance company considered the pendency of said proceedings as in any way affecting the policy that was issued. With reference to failure of appellant to notify the insurance company that his permit had been revoked, this did not create any additional hazard, unless it should be assumed that the owner of the winery would be thereby tempted to destroy it by fire. The appellant, if an honest man, would have no occasion to give notice that he might possibly be tempted to destroy his building by.fire; and, if a dishonest one, he certainly could not be expected to do so.

Judgment reversed.

SAWTELLE, Circuit Judge, concurs. '