text:
    THE ALGIE (two cases).
    Nos. C-2641, 12454.
    District Court, E. D. New York.
    June 5, 1931.
    See, also, 50 F.(2d) 623.
    Howard W. Ameli, U. S. Atty., and Alfred C. McKenzie, Asst. U. S. Atty., both of Brooklyn, N. Y.
    Crowell & Rouse, of New York City, for Todd Dry Dock Engineering & Repair Corporation.
    Louis Halle, of New York City, for claimant.
   CAMPBELL, District Judge.

These suits came before this court on three motions:

(1) Motion by the United States of America to set aside an order herein, dated May 14, 1931, directing the release of the British oil screw Algie to the claimant, Yar-mouth Shipping Company, Limited, upon the filing of a bond in the sum of $4,000, and either directing a reappraisement or denying the claimant’s motion for the release of the vessel.

(2) Motion for hearing on exceptions of the United States of America interposed to the libel of the Todd Dry Dock Engineering & Repair Corporation.

(3) Motion for hearing on exceptions to the libel of the United States of America, interposed by the Todd Dry Dock Engineering & Repair Corporation, intervener.

These motions have such a relation to each other that they must be considered together.

On February 15,1931, the vessel in question, with a cargo of 2,580 bags of rye and scotch whisky and a miscellaneous number of bottles of scotch whisky, was seized on the north side of Montauk Point, Long Island, by the Coast Guard.

On or about April 20, 1931, the United States of America filed a libel against the said vessel and her cargo for violation of section 3450 of the Revised Statutes (26 USCA §§ 1181, 1182), and sections 584, 592, and 591 of the Tariff Act of 1930 (19 USCA §§ 1584, 1592, 1591).

On April 21, 1931, the Yarmouth Shipping Company, Limited, filed a claim and answer in this proceeding.

On the 6th day of May, 1931, a motion was made by the claimant for an order directing the release of the said vessel, upon the filing of a bond in the sum of $4,000.

That motion was granted, and an order entered thereon, on May 14, 1931.

On May 13,1931, the day before said motion was granted, the Todd Dry Dock Engineering & Repair Corporation filed a petition for intervention in the libel of the United States of America, and also filed an independent libel for substantially the same causes alleged in the petition of intervention. A monition was issued in the Todd libel to the marshal for the attachment of the said vessel, which monition was returnable May 27, 1931.

On May 15, 1931, the United States of America secured an order to show cause why the order of May 14, 1931, should not be set aside, and why either a reappraisal should not be had, or the motion for the release of the vessel denied.

On May 22, 1931, the intervener, Todd Dry Dock Engineering & Repair Corpora^ tion, filed exceptions to the libel of the United States of America, on the ground that, from the facts set forth in the libel, forfeiture should be sought under Section 26 of title 2 of the National Prohibition Act (27 USCA § 40), rather than under section 3450 of the Revised Statutes, and the Tariff Act of 1930.

Under the conditions prevailing, with the Todd Dry Dock Engineering & Repair Corporation intervening in the libel of the United States of America, it would not be right to release the vessel on a $4,000 bond.

The claimant has offered to give a bond for value in the sum of $4,000, the appraised value of the Algie as at the time of the seizure, pursuant to section 938 of the Revised Statutes (28 TJSCA § 751), and a stipulation for value in the sum of $15,000 to cover the claim of the Todd Dry Dock Engineering & Repair Corporation, and this would be a proper way to dispose of the motion to admit to bond if there was but the one libel of the United States of America.

However, there is the separate libel of Todd Dry Dock Engineering & Repair Corporation, and it might well contend that claimant give a stipulation for value in that suit as well, which would place an undue burden on the claimant.

The remedy, it seems to me, must be found in the manner I will indicate.

The exceptions of the United States of America to the libel of the Todd Dry Dock Engineering & Repair Corporation are overruled. The weight of authority supports their right to file a libel, if they have a maritime lien, and not to be restricted to the right to intervene in the libel of the United States of America. But, as the exceptions in part are based upon conditions which involve the determination of questions of fact which can only be determined on the evidence given on the trial, they are overruled, without prejudice to raising them on the trial.

The exceptions of the Todd Dry Dock Engineering & Repair Corporation to the libel of the United States of America cannot be sustained, because they are dependent upon the establishment of certain facts which do not now appear of record, and can only be shown by evidence to be given on a trial, and they are therefore overruled, without prejudice to raising them on the trial.

Under all the circumstances, the only practical solution of the problem presented is consolidation of the suite, and, as both suits will actually be tried in admiralty, although differently docketed, but by the judge holding the common-law term, on which calendar they will appear, that result will best be obtained by consolidating both of the above-entitled suits under the title, “United States of America, Libellant, against The British Oil Screw Algie, her taekle, etc., Todd Dry Dock Engineering & Repair Corporation, Tn-tervenor, C. 2641,” and such consolidation is ordered.

The motion to set aside the order entered on May 14, 1931, directing release of the Algie upon the filing of a bond, is granted, and the motion for release of the Algie, upon the giving by the claimant, in the consolidated suit, of a bond for value in the sum of $4,000, the appraised value of the Algie, as at the time of the seizure pursuant to section 938 of the Revised Statutes, and a stipulation for value in the sum of $15,000, to cover the claim of the Todd Dry Dock Engineering & Repair Corporation, is granted.


source: Caselaw Access Project

author: BYERS, District Judge.

license: Public Domain

text:
    In re AMERICA DRY CORPORATION.
    No. 17143.
    District Court, E. D. New York.
    May 25, 1931.
    Zalkin & Cohen, of New York City (Lewis H. Saper, of New York City, of counsel), for trustee.
    Abraham N. Davis, of New York City (Manfred Nathan, of New York City, of counsel), for respondent Gordon.
    Saul S. Streit, of New York City (Abraham I. Menin, of New York City, of counsel), for respondents Manhattan Rood Specialty Co. and Weinberg.
    Edward. Keller, pro se.
   BYERS, District Judge.

This is a motion to confirm the report of a referee in bankruptcy directing the tum-over of certain property to the trastee.

A report bearing date August 28, 1930, came before Judge Moseowitz on September 19, 1930, and, under date of October 27, 1930, he signed an order referring the matter back to the referee with a suggestion that the findings of fact upon which the report was based and the reasons for his conclusions be set forth in a new report, and, in the interest of justice, an opportunity be granted to the respondents to produce any additional proof which they claimed to possess.

Pursuant to that order, hearings were held on December 26, 1930', and January 16, 1931, and, under date of April 2, 1931, the referee made a supplemental report to the same effect as his first report and setting forth the reasons upon which his conclusions were based.

An involuntary petition in bankruptcy was filed on January 11, 1929, on or about which date the late Jesse Fuller was appointed receiver and took possession of the company and its assets, and conducted the business until February 14, 1929, on which day the assets were sold at public, sale.

Mr Fuller was elected Trustee but died before his duties could be completed, and the petitioner herein was duly appointed as his successor.

The bankrupt had been engaged in the manufacture and sale of ginger ale at No. 214 Borden avenue, Long Island City, and it is possible to discern, from the testimony in this proceeding, that internal disputes arose and resulted in factional clashes between certain of the officers and director’s during the two months or so which preceded the bankruptcy.

The respondents named in the order to show cause dated October 3, 1929, which is the basis of this proceeding are Mrs. Lena L. Gordon, who owned not less than 50 % of the stock of the bankrupt, Edward Keller who became a director of the bankrupt company during the fall of 1928 and seems to have acted as manager during the ensuing eight or ten weeks, Jesse L. Weinberg who is the. president of the Manhattan Eood Specialty Co., Inc., and the latter corporation.

The petition upon which the order to show cause was granted relates that the receiver continued, during his activities, the said Gordon and Keller in the control and management of the bankrupt, and one Paul Moses. (The latter had been the treasux-er of the corporation and was a witness befoi’e the referee, but bis testimony was not of any particular significance, as to the issues here presented.)

That the Manhattan Co., located at Nos. 326-328 East 108th street, borough of Manhattan, was engaged in the sale of products similar to .those manufactured- by tbe bankrupt; and that, while the said Gordon and Keller were in the control and charge of the business under the receiver, they conspired with Weinberg, who was the treasurer of the Manhattan Co-,, and the latter, for the purpose of obtaining property and merchandise belonging to the bankrupt and diverting the same to the said Manhattan Co. without payment therefor to the receiver; and that such property was transferred, and the proceeds were concealed and retained from the trustee.

The petition enumerates the items of ginger ale said to have been so diverted, and alleges that the diverted items were not entered in the books and records of tbe bankrupt, and that tbe regular sale price and reasonable market value of all of tbe merchandise so diverted was $8,707.85. ,

Upon the return of the order to show cause, the matter was referred to Referee Hofmann, with the result first above stated.

The total value of the merchandise found by the referee so to have been diverted, and with which the four respondents are charged, is $7,144.80, and 'it becomes necessary to examine the proceedings before tbe referee in an effort to ascertain whether tbe conclusions are sustained by the evidence.

It will be convenient to divide the transactions to which the report refers into two-classes :

First: Those as to which the Manhattan Co. íidmits indebtedness; such are comprehended in Trustee’s Exhibit 3, a loose-leaf ledger sheet, which shows a balance due from the Manhattan Co. of $1,613.00.

This is made up of four items representing merchandise consigned between January 11, 1929, and February 6-, 1929, less “empties” and- an allowance the nature of which is not disclosed.

The Manhattan Co. disputes one of the four items, amounting to $110.25, and it claims credit for returns of merchandise and empties and other items not requiring recapitulation, totaling $1,005.15, leaving a .balance conceded to be due of $705.06.

It will be seen that the difference between the amount claimed under this head by the trustee and the amount conceded to be due from the Manhattan Cc. is $907.40. The Manhattan Co. produced receipts, dated February 6th and 7th, respectively, which seem to show total credits of $741.60, but whether the credits so claimed include the credit items shown on Trustee’s Exhibit 3, above referred to, which total $208.00, it is impossible to say.

The referee correctly states that the books and records of the bankrupt during the. period of the receivership seem not to have been maintained according to the system formerly employed, by which each sale was shown upon triplicate slips, one retained for accounting purposes, one for the shipping department, and one for the customer, and credit items were recorded in a ledger account; consequently it is impossible, from the available records, to reconcile these differences. Having in mind that Mrs. Gordon and Mr. Keller were ostensibly acting on behalf of the receiver during the period of his administration, it is fair to conclude that the credit items appearing upon Trustee’s Exhibit 3 should be deducted from, the credits claimed by the Manhattan Co. as duplications, which leaves a difference of $533.60 between the total consignments as shown by Trustee’s Exhibit 3 and the total credits claimed by the consignee. The credits claimed in Creditors’ Exhibits A and B, signed and identified by the witness Green called by the trustee, will be allowed to the extent of the latter figure. '

It will, therefore, be found, for present purposes, that there is due from the Manhattan Co. to the trustee, upon the items recorded in the books of the bankrupt, the sum of $1,079.40. There is no allowance of 25%, apparently, claimed for the Manhattan Co. in connection with these particular transactions.

Second: Irregular transactions established by exhibits produced by the trustee, namely, rough receipts signed by employees of the Manhattan Co.

Without reviewing the testimony at length, it may be said that the deliveries shown by these receipts were made while Gordon and Keller were acting for the trustee, and with the knowledge of Keller. Many of the deliveries were made at night, and could not have been shown except from the testimony of the watchman, and by crude receipts signed by truck drivers. No records were made of them on the sale slips, ledger or other elements of the accounting equipment of the bankrupt.

By reason of the death of Mr. Ehller, the trustee is deprived of the opportunity to establish from his lips the precise nature of the authority conferred upon Keller and Gordon, and the extent to which he confided in them; as the referee truly observes, their demeanor as witnesses was not such as to command confidence. At one stage of the examination, Keller was asked what his sources of income were, because he had testified that he worked for the bankrupt, and for the Manhattan Co. after the bankruptcy, without compensation. He refused to answer, on the ground that'to do so might tend to incriminate and degrade him. Later and at the same hearing, he asked to be recalled and permitted to testify that the sources of income to which he referred were payments made for sundry investigations that he conducted for an attorney.

Mrs. Gordon, who established a new ginger ale enterprise on or about March 1, 1929, and who associated herself with Mr. Weinberg in that endeavor, was shown a circular letter soliciting the trade of the bankrupt’s customers, issued by her under date of March 6,1929, and bearing her signature, which she first refused to identify positively, but later admitted to be genuine.

These incidents naturally challenged the credulity of the referee when he was asked to believe that these two witnesses were without knowledge concerning the shipments above referred to, which were shown by receipts signed by a truck driver in the employ of the Manhattan Co., the building of which was occupied by the new Gordon enterprise during its formative period.

It is not the fact, however, that all of the eases of ginger ale now referred to are properly chargeable to the Manhattan Co., because the evidence shows that the “Yukon Club” items were returned in whole or in part, for the reason that this was a private brand of the Atlantic & Pacific Tea Co., shown upon the labels and bottle tops of the bottles in which the ginger ale was purveyed; obviously that brand could not be sold except by the latter company, and the testimony ..concerning the return is sufficiently convincing to justify deduction of these cases from the total deliveries shown by the rough receipts.

The prices at which the America Dry Ginger Ale was quoted to the Manhattan Co-, and the trade was $5.80 per ease of 50/12 ounce bottles and $9.80 per case of 100/6 ounce bottles, but this was subject to a discount of 25%, and no reason is stated in the report of the referee' for not computing that discount in arriving at the amount which should be charged for the purpose of this proceeding.

A summary of the deliveries covered by the exhibits above referred to, and which are believed to be properly chargeable to the recipient, is as follows:

■ The result of the foregoing is that there Should be charged in this proceeding the sum of $2,483.85 as the value of the merchandise diverted from the bankrupt estate, in addition to that which was consigned as shown by Trustee’s Exhibit 3.

It now becomes necessary to determine whether all of the respondents have been shown to have been in possession of the foregoing property, and, upon this subject, it is necessary to differ with the referee.

Having in mind that the object of this turn-over proceeding is to recover property withheld from the trustee by the respondents, it will be seen that, unless they came into such possession, they cannot he directed to surrender it; while it is entirely probable that the respondents Gordon, Keller and Weinberg contrived to bring about the diversion in question and thereby may have rendered themselves answerable to the trustee in an appropriate action at law, it does not seem that the evidence under examination justifies the making of a turn-over order against them, for the disobedience of which they could be punished for contempt; the drivers who took the goods from the place of business of the bankrupt were just as culpable as the principals who directed their operations, but it is not shown that the diverted merchandise came into the ultimate possession of the drivers any'more than that it came into the ultimate possession of the individuals above named.

The reasoning employed in In re Gilroy & Bloomfield (D. C.) 140 F. 733, while the result of different circumstances, reflects the attitude of this court, upon this aspect of thé record.

It was the Manhattan Pood Co. that received the merchandise and probably profited thereby, and it is that company which should be the subject of the order herein.

The referee’s report, therefore, is modified as to the value of the merchandise shown to have been taken, and not returned, and as .to the respondents against whom the order should run.

As the consigned merchandise treated under paragraph Eirst hereof never became the property of the Manhattan Eood Co., the latter should be directed .to return the same or the value thereof as fixed herein, and, as to the other merchandise treated in paragraph Second hereof, the same result should follow.

Settle order on notice, providing for the return of the merchandise, or payment of the sum of $3,563.25, by the Manhattan Food Specialty Co., Inc.


author: KENNAMER, District Judge.

text:
    HAMILL et al. v. HAWKS et al.
    No. 1224.
    District Court, W. D. Oklahoma.
    May 29, 1931.

      C. B. Cochran, of Oklahoma City, Okl. (Ames, Cochran, Ames & Monnet, of Oklahoma City, Okl., of counsel), for complainants.
    J. Berry King, Atty. Gen. and W. C. Lewis, Asst. Atty. Gen., for defendants.
   KENNAMER, District Judge.

The exhibits to the petition show that Carter et al. filed applications with the boards of county commissioners of Cleveland and MeClain counties for permission to construct a bridge over the South Canadian river and to collect tolls. The board of county commissioners of McClain county on the 22d day of April, 1911, passed a resolution making the grants as prayed for; and the board of county commissioners of Cleveland county on the 16th day of May, 1911, did likewise. The grants in both resolutions are perpetual, subject to such limitations as are by law now or may hereafter be provided. Both resolutions further provide that the grants are assignable to any individual or corporation.

The MeClain county resolution also provides that the bridge shall be erected within the time provided by law or else the authority granted shall lapse. The Cleveland county grant authorizes the grantees to use so much of the public highway as may be necessary. It is expressly provided that neither grant shall be exclusive. In both grants, reference is made to the “Bridge Company.”

There is also attached to the complainants’ petition an assignment to a bridge company of all the rights acquired by Carter et al., by virtue of the grants from the counties, together with that portion of the bridge which it is recited was then in process of construction and which was later completed by the corporation.

I am unable to find in the statutes any section expressly authorizing the construction of bridges within the state by individuals, but article 6 of chapter 34, C. 0. S. 1921, provides for the incorporation of bridge companies.

Section 5366, C. 0. S. 1921, limits the term of existence of such corporations to twenty years and provides further that the articles of incorporation shall give the location of the bridge and shall state if the corporation owns the banks on both sides of the stream; and if it does not own such banks, that it has obtained the consent of the owners thereof to the erection of the bridge; or if the banks at such places are included within and are a part of a public highway, that the consent of the board of county commissioners has been obtained.

Section 5367, C. 0. S. 1921, is as follows: “No such corporation shall construct or take tolls on a bridge until authority is granted therefor by the board of county commissioners of the county or counties in which it is to be located.”

Section 5368, C. 0. S. 1921, provides that the corporate existence of a bridge company shall terminate unless it has obtained from the board of county commissioners the authority mentioned in section 5367, and unless it has within one year commenced the construction of its bridge. The second paragraph of this section provides that its corporate existence shall terminate if the bridge is not completed within three years from the issuance of the corporation’s charter.

It is clear from a consideration of sections 5366 and 5367 that the latter section is a limitation upon the power of the corporation created under the authority of section 5366. Such corporation is not authorized after the construction of such bridge to collect tolls unless it obtains authority from the county commissioners of the county where such bridge is located, and it is quite plain the authority to collect tolls cannot be extended by the county commissioners granting such authority beyond the life of the corporation. This, for the reason it is only corporations chartered for a period of twenty years that have authority from the sovereign to build and construct and operate toll bridges over the streams of the state, and the authority is limited in time to twenty years to such corporation, and it is beyond the power of •the county commissioners to authorize the collection of tolls by such corporations beyond the period of limitation fixed by the Legislature.

Article 18, chapter 34, C. O. S. 1921 (§§ 5625-5636) provides for the incorporation of wagon road corporations.

Section 5625, C. O. S. 1921, states that the road must be laid out as follows: Three commissioners appointed as specified must lay out the proposed road and report their proceedings, accompanied by a map, to the board of county commissioners.

Section 5626, C. 0. S. 1921, provides that the report must give the road’s general course, the principal points thereon, its width, and the same must then be either approved or rejected by the board of county commissioners.

Section 5627, C. 0. S. 1921, provides that wagon road corporations may keep ferries or establish bridges on the line of their road, and that they may take only such tolls on their roads, ferries, or bridges as are fixed by the board of county commissioners of the county through which the road passes, or in which the ferry or bridge is situated.

Section 5636, C. O. S. 1921, reads as follows: “When a wagon, turnpike or plank road is constructed, owned or operated by any natural person, this article is applicable to such person in like manner as it is applicable to corporations.”

It is obvious from the grants that the grantees were not endeavoring to proceed under the wagon road incorporation article. Nothing is said therein with reference to the commissioners, the survey, or anything about a road. This article clearly contemplates that bridges and ferries which may be established are for the purpose of connecting two sections of the road or are for the purpose of providing access to the road.

■ It would seem to be quite clear from the grants that an effort was made to comply with the bridge corporation article. No reference is made in either grant to any permission to construct a road. A bridge alone is referred to, and the grants from the commissioners contain express authority to collect tolls as is provided in section 5367, C. 0. S. 1921.

It is set forth in the bill of complaint that this right to take tolls was granted to individuals who in turn assigned the same to a corporation, which constructed the bridge and which prior to the expiration of its charter conveyed the bridge together with the right to take tolls to complainants. The grant to the individuals undoubtedly from the allegations of the bill and the evidence introduced on the hearing was taken and held in trust for the corporation which they later formed on May 18, 1911. The right to take toll would, of course, never amount to anything unless the bridge was completed.

It is, of course, axiomatic that the boards of county commissioners' have no inherent powers and that the powers granted to them by the Legislature are to be strictly construed.

Counsel for the complainant in his brief and on the oral argument relies upon the case of Postal Bridge Co. v. State ex rel. Dabney, Attorney General, 139 Okl. 225, 282 P. 462, to sustain his contention that a franchise may be granted to an individual to own and operate a toll bridge in the state of Oklahoma, and that the decision is binding upon the federal courts construing a state statute. The case is not authority for thi3 contention. In this case the De Luxe Bridge Company was granted a charter on the 14th day of January, 1920’, amended November 29, 1920, as a toll bridge corporation to construct such bridge at Bridgeport in Blaine county, Okl. It obtained a franchise from the board of county commissioners of Blaine county authorizing it to collect tolls from such bridge. The De Luxe Bridge Company sold and assigned its franchise to operate the bridge to the Postal Bridge Company long prior to the expiration of its corporate charter. The Postal Bridge Company was not a 'corporation, but an express trust. The state instituted its suit to enjoin the Postal Bridge Company from operating the toll bridge and collecting tolls, alleging that said De Luxe Bridge Company was not authorized to own a franchise and to operate a toll bridge within the state of Oklahoma, and for that reason did not have any franchise or right that could be assigned or sold to the Postal Bridge Company, and that the Postal Bridge Company was unauthorized to operate said toll bridge. It was held that a corporation hav ing a franchise to operate a toll bridge could sell and assign sueb franchise to an express trust or an individual, and the corporate entity of such toll bridge corporation could not be collaterally attacked; that there is no inhibition to be found in the constitution and statutes of Oklahoma against a toll bridge corporation from selling its secondary franchise, subject to the conditions and requirements contained in said franchise. The ease is not authority sustaining the power of county commissioners to grant a perpetual franchise to individuals to collect tolls upon a toll bridge built over the streams of the state.

It is provided in section 10104, C. O. S. 1921, that county commissioners may grant to individuals as well as corporations authority to construct bridges over a stream which constituted a state boundary line.

However, it will be observed from the sections referred to that the Legislature very clearly distinguished between bridges located wholly within the state and those over streams constituting boundaries. The bridge in question over the South Canadian river lies wholly within the state of Oklahoma, and the county commissioners of McClain and Cleveland counties were without authority to grant to Carter et al. a franchise to take toll, unless the grants were taken for the benefit of the bridge corporation which they immediately formed. This, in my opinion, was the case. This conclusion is emphasized still further by the fact that in each grant “Bridge Company” is referred to.

Counsel for complainants have referred to the ease of Grove Bridge Co. v. State, 133 Okl. 115, 271 P. 846. The grant in this case was to individuals, as was permissible under the Arkansas law in forte in the Indian Territory at the time of the grant.

In Gibson v. Rogers County, 75 Okl. 51, 181 P. 720, the plaintiff in error was proceeding under the wagon road incorporation article and not under the bridge incorporation article.

In my opinion, it is clear that the original grantees herein were endeavoring to proceed under the bridge incorporation article, preparatory to the formation of a corporation.

Having reached the conclusion that the franchise to take tolls has expired, it next becomes necessary to determine what becomes of a toll bridge upon the expiration of the franchise to take toll. This question has been passed on by the Supreme Court of Oklahoma in the case of Grove Bridge Co. et al. v. State ex rel., 133 Okl. 115, 271 P. 846, and Postal Bridge Co. v. State ex rel., 139 Okl. 225, 282 P. 462, which hold that the bridge then becomes the property of the state. It is quite clear from the authorities, generally, that upon the expiration of a toll franchise that the use of a bridge is free to the citizens of the state just as other public highways. Mr. Justice Brewer, while a member of the Supreme Court of Kansas, in the ease of State ex rel. v. Lawrence Bridge Co., 22 Kan. 438, 463, stated the applicable rule as follows: “For I agree with the chief justice that the bridge is a permanent structure on the public highway, and under the authorities, when the franchise to take tolls ceases, the right of the public to use the bridge free from any burden of tolls attaches, without any right on the part of the builders to remove the structure and destroy the highway. The right to take tolls for a specified number of years was the consideration granted by the public to the defendants for the privilege of placing this improvement on the highway, and the former owners have now no more right to remove the bridge than the owners of a turnpike to tear up after the franchise to take tolls has ceased.”

The opinion of the Chief Justice in the foregoing case is well worthy of consideration and shows clearly that such a conclusion works no hardships on the owners of the biidg'e who, as is true in the instant case, have very probably long since been repaid many times over the cost of the construction and maintenance of the structure.

See, also, Virginia Canon Toll Road Co. v. People, 22 Colo. 429, 45 P. 398, 37 L. R. A. 711; State ex rel. v. Scott County, etc., Road Co., 207 Mo. 54, 105 S. W. 752, 13 Ann. Cas. 656; Rockwith v. State Road Bridge Co., 145 Mich. 455, 108 N. W. 785; People ex rel. v. Anderson & U. Valley Road Co., 76 Cal. 190, 18 P. 308; Grand Rapids Bridge Co. v. Prange, 35 Mich. 404, 24 Am. Rep. 585.

Numerous eases to the same effect are referred to in the brief of the defendant in error in the ease of Scott County Macadamized Road Co. v. Missouri ex rel., 215 U. S. 336-338, 30 S. Ct. 110, 54 L. Ed. 221.

I am of the opinion that where the bridge corporation article was endeavored to be followed that the board of county commissioners could not grant a toll franchise for more than twenty yeai-s. The grants involved herein read as follows: “That the grants herein made shall be perpetual, subject only to such limitations as is by law now, or may hereafter, be provided.”

This grant, of course, must be read in connection with the authority of the boards of county commissioners. In City of Okmulgee v. Okmulgee Gas Co., 140 Okl. 88, 282 P. 640, the Supreme Court of Oklahoma held that a perpetual franchise would violate the perpetuity -section of the state Constitution.


author: JAMES, District Judge.

text:
    In re WESTERN STATES BUILDING-LOAN ASS’N.
    No. 16455.
    District Court, S. D. California, Central Division.
    June 5, 1931.
    Gold, Quittner & Kearsley, of Los Ange-les, Cal., for petitioning creditors.
    Dryer, Castle, McConlogue & Richards, of Los Angeles, Cal., for alleged bankrupt.
    Bicksler, Smith, Parke & Catlin, of Los Angeles, Cal., for intervening creditor.
   JAMES, District Judge.

An involuntary petition was filed herein, being verified by three alleged creditors. The description of the debt of each creditor is set forth in-the following terms, there being a difference in the names and amounts only: “The claim is for moneys deposited with the alleged bankrupt, which moneys the alleged bankrupt agreed to return upon demand (subject to the provisions of the laws of the State of California regarding building and loan associations and the bylaws of the alleged bankrupt applicable thereto.) That an account stated was rendered by the alleged bankrupt and the petitioner in the sum of-and said sum was agreed to be due, owing and payable from the alleged bankrupt to the petitioner herein.”

The act of bankruptcy alleged is that, within four months preceding the date of filing the involuntary petition, respondent being then insolvent, an equity receiver was appointed and put in charge of its property. A motion is made on behalf of the alleged bankrupt and an intervening creditor to dismiss the petition on the ground chiefly that petitioners are not shown to be creditors holding provable claims. The argument in support of the motion to dismiss is mainly to the point that the contract relationship of the alleged creditors with the alleged bankrupt is that of certificate holders or shareholders, as to whom the right to have payment made is contingent and not certain — hence that the claims of such creditors are not presently provable. Section 59b of the Federal Bankruptcy Act, 11 USCA § 95 (b) describes parties who are permitted to file an involuntary petition as follows: “Three or more creditors who have provable claims against any person which amount in the aggregate, in excess of the value of securities held by them, if any, to $500 or over. * * * ”

The law of the state of California which authorizes the formation of building and loan associations requires that the articles o-f incorporation shall state that the association is formed to encourage “industry, frugality, homebuilding, and savings.among its shareholders and members; the accumulation of savings; the loaning to its shareholders and members of the moneys and funds so accumulated, with the profits and earnings thereon, and the repayment to each of his savings and profits, whenever they have accumulated to the full par value of the shares, or at any time when he shall desire the same or when the corporation shall desire ' to repay the same, as it may be provided in the by-laws. * * * ” Civ. Code Cal. § 633.

It is provided by the California law that building and loan associations shall have what is known as “guarantee stock,” which becomes permanent capital, and is required to remain as such, and is subject to the liabilities attached to paid-in capital stock of other classes of commercial corporations.' It is provided that the guaranty stock “shall protect and guarantee all other stockholders and creditors against any loss. * * * ” (Civ. Code Cal. § 634 (d). With the capital stock as a supporting basis, building and loan associations invite public patronage in investments, and, while these patrons might conventionally be called depositors, their deposits are applied in the purchase of other classes of shares listed as “installment shares,” “full paid shares,” “pass book shares.” The depositor or shareholder receives interest on his investment or deposit.

It is to be noted that the contract relationship established does make the association the debtor of its shareholder, for the latter is entitled to receive back his money, and cannot be compelled to remain a shareholder against his will. It is provided in the law (section 642, Civ. Code Cal.) that, if the stockholder-investor shall decide to withdraw his investment, he may be required to give thirty days’ notice of his intention so to do. In the section cited it is then provided: “On the expiration of such notice, he is entitled to receive the full amount paid in upon the stock or investment certificate surrendered, exclusive of the entrance fee, together with such proportion of the earnings thereon as the bylaws may provide, or as may be fixed by the board of directors; but not more than one-half of the monthly receipts in any one month must be applied to withdrawals for that month,- without the consent of the board of directors. * * * Whenever the demands of withdrawing stockholders or investors exceed the money applicable to their payment, the notices of intention to withdraw must be registered in the order of filing and payments thereon must be made in succession, in the order that such notices were filed and registered.”

It is asserted by the respondent and the intervening creditor that, as the withdrawing investor or depositor is limited as above provided in respect to the fund from which he shall be paid, his claim is contingent, and hence not provable in bankruptcy.

The claim of a depositor or investor is not contingent as to amount, at least so far as the principal sum is concerned; the association remains his debtor, regardless of the time when he may be paid. Where such an association is active and pursuing its normal course of business, the depositor must be bound by the contract which he has made, affected by the provisions of the law applicable thereto. When an association is forced into liquidation, and as a consequence is in a position no longer to fulfill its obligations, it must be that the debt matures, and that, in whatever fund is realized upon a sale of the assets, the debtor or shareholder is entitled to participate. The question of the order of payment, or the classification that his claim may be given, is immaterial. The creditor should be entitled to prove his claim where such a contingency arises. As is said in Central Trust Company v. Chicago Auditorium, 240 U. S. 581, at page 591, 36 S. Ct. 412, 415, 60 L. Ed. 811, L. R. A. 1917B, 580: “It must be deemed an implied term of every contract that the promisor will not permit himself, through insolvency or acts of bankruptcy, to be disabled from making performances; and, in this view, bankruptcy proceedings are but the natural and legal consequence of something done or omitted to be done by the bankrupt, in violation of his engagement.”

Again, on page -589 of the same decision (36 S. Ct. 412, 414): “It is no longer open to question in this court that, as a rule, where a party bound by an executory contract repudiates his obligations or disables himself from performing them before the time for performance, the promisee has the option to treat the contract as ended, so far as further performance is concerned, and maintain an action at once for the damages occasioned by such anticipatory breach. * * * It was * * * held in Lovell v. St. Louis Life Ins. Co., 111 U. S. 264, 274, 4 S. Ct. 390, 28 L. Ed. 423, 426, where a life insurance company became insolvent and transferred its assets to another company, that a policy holder was entitled to regard his contract as terminated and demand whatever damages he had sustained thereby.”

See, also, Collier on Bankruptcy (13th Ed.) volume 2, p. 1409, on Anticipatory Breach; Williams v. U. S. Fidelity & Guaranty Co., 236 U. S. 549, 35 S. Ct. 289, 59 L. Ed. 713; Maynard v. Elliott, Trustee, and companion cases, 51 S. Ct. 390, 75 L. Ed. -, decided by the Supreme Court of the United States on April 13, 1931.

The- involuntary petition alleges that, prior to the filing thereof, a receiver in the equity case had been appointed, and that the respondent association was at the time insolvent. In such circumstances, the association ceased to be a going concern, and its inability to perform its contracts became established. Central Trust Company v. Chicago Auditorium, supra. The question of its insolvency at the time of the appointment of the receiver is an issue tendered by the petition, and the association is entitled to resist it, if the facts so warrant.

My conclusion is that the petitioners do show that they have provable claims, and as creditors have the right to prosecute their petition. Wilson et al. v. Continental Building & Loan Association, 232 F. 824 (C. C. A. 9th). As I read that decision, it is in point. In my opinion, the petition in other respects is sufficient.

It is perhaps an unfortunate condition . of the Bankruptcy Law which permits creditors, with a few small claims, to interfere with and thwart reorganization plans approved by the majority interest, and which are sought to be carried through under an equity receivership. An amendment to.the Bankruptcy Act, which would empower the court to suspend proceedings for a reasonable or limited time under any bankruptcy petition filed, to allow a reorganization to be effected, would no doubt be beneficial legislation. Possibly, in view of recent official surveys made of bankruptcy practice, changes in the law, for which there seems need, will result.

Meanwhile, the bankruptcy court, influenced by the consideration that peremptory liquidation of the assets of the association may result in loss in dividends to creditors, should lend all possible assistance, and through every means that the law will permit, to prevent the sacrifice of property.

The motion to dismiss the involuntary petition must be denied, and it is so ordered. An exception is noted in favor of the respondent and intervening creditor.


author: TUTTLE, District Judge.

text:
    LAPEER TRAILER CORPORATION v. FRUEHAUF TRAILER CO.
    No. 1913.
    District Court, E. D. Michigan, S. D.
    June 2, 1930.
    See also 24 F.(2d) 595.
    Barthel, Flanders So Barthel (by Otto F. Barthel and Ralph S. Binns), all of Detroit, Mich.), Dyrenforth, Lee, Chritton So Wiles (by Russell Wiles), all of Chicago, 111., and MaeKay, Wiley, Streeter, Smith So Tucker (by Arthur M. Smith), all of Detroit, Mich., for plaintiff.
    Stuart C. Barnes and Lacey Laughlin, both of Detroit, Mich., for defendant.
   TUTTLE, District Judge.

The bill charges infringement of the Peseatore patent, No. 1,084,820, granted July 20,1914, on an application filed July 6,1914. The answer sets up the usual defenses of invalidity and noninfringement.

This patent has to do with means for connecting a trailer to a traetor. The particular means shown in the patent and relied upon in its claims is an upwardly inclined part of the back of the traetor which, when backed into the truck or trailer, will raise the front of the trailer and automatically fasten the trailer to the traetor.

The claim particularly relied upon by plaintiff is the sixth and last of the claims in the patent. It reads as follows:

“The combination of a wheeled truck, and a traetor having at one end an upwardly inclined section adapted to be moved beneath and detachably connected with one end of the truck and during such movement to coupling position lift the truck wheels adjacent said engaged end from the ground whereby the weight of the truck and load will be borne by the other truck wheels and the tractor.”

This method and arrangement accomplish the desirable result of placing a portion of the load of the trailer on the rear of the tractor, thereby increasing the traction or road friction of the driving wheels of the tractor. As the load on the trailer increases, greater traction is required and the increasing load thrown on the back part of the tractor by the trailer automatically increases the traction correspondingly to the load of the trailer.

The arrangement claimed also furnishes an easy means by which the driver of the tractor can connect his tractor with his truck or trailer, and adapts itself to the fifth wheel construction which is so necessary in all steerable vehicles having more than one set of wheels. Its utility is such that it has come to be generally used in present day tractor-trailer construction.

As we come to decide whether or»not claim 6 covering this useful, valuable, and helpful feature of tractors has been anticipated, and to determine what part of it was new at the time of the application for the patent thereon, we are met at the outset with the problem as to just where to look for references and just what to consider.

I sometimes think that the use of the word “art” causes more confusion and more trouble than it avoids.

Not many arts are bounded by fixed exact lines like those which bound real estate. Their boundaries are not only rather uncertain and indefinite, but one art often overlaps another. One day, for instance, we may be dealing with automobiles and discuss the automobile art. The next day we may be dealing with gas engines and we talk about the gas engine art. These two arts overlap. The gas engine has found its way into the automobile art, the airplane art, motorboat art, and many other places.

Some things are of such common use that they do not belong to any particular art. The general use, for instance, of hammers, nails, and saws is so old that we do not call them an art at all, for we find them in almost every art.

In one case relating to a particular structure, a decision that two arts are so closely related that an idea may be brought from one to the other without invention may be entirely correct, and yet, in another ease as to some other subject-matter, the conditions in two arts may be so different that an opposite holding may be required and the decisions in the two eases will not necessarily conflict at all.

For example, the engine of an automobile and that of an airplane may be so close that the transfer of an expedient from one to the other may well be perfectly obvious. The body of an airplane and that of an automobile are sufficiently different as to raise serious questions, whereas the wing of an airplane is thoroughly remote from anything in other fields of transportation. Perhaps the most analogous structure is the curved wings of railroad snowplows, yet we would hesitate to deny invention to one who successfully employed a snowplow wing on an airplane simply because it came from the broad field of transportation.

In determining whether a patent really displays ingenuity, whether the patentee gave the world something worth while, we should measure how big a load he carried and how far he carried it rather than inquire as to the technical boundaries of the “art” in which he worked. Under some definitions, the very art in which he worked may be of such magnitude that the distance between its divisions is very great, while under other definitions, the different parts of quite separate arts may be very close together.

We may use the term “transportation art” and include steamboats, airplanes, wagons, carriages, carts, sleighs, automobiles, trucks and trailers, steam and electric trains, horse-drawn street ears, dog carts and dog sleds. This term covers every means of commercial transportation. Such terms do not help very mueh.

In weighing the patentee’s achievement, we must also consider how difficult it is to find his principles, whether they did exist or not and whether they could all be found in one place.

Even though one must go some distance to get the things he needs, if they are all found together and can be carried home in one basket, they do not count for so much when weighed on the scales of justice as if one thing is found in one place, another thing in another place, and they must be brought in separately and assembled. There is difficulty in that and credit should be awarded for it.

It would not be much of a stretch of the imagination to call the great motor vehicle art, bom and developed in the lifetime of all of us, an art by itself. Certain things were largely appropriated from other arts,’ hut whether it be the body or the top or the wheels or the engine or some other part, their adaptation required a good deal of skill in addition to the mere idea of a self-propelled vehicle. We can trace the origin of some of these parts. The dash and top were at first taken almost bodily from the old buggy and the wheels from the old wagon, yet it has taken much real ingenuity to adapt these old things to automobile use.

Some automobile practice was undoubtedly taken from the railroad. I do not know, again, whether it is fair to call these different arts or branches of the transportation art and it does not matter what we call them. We should not start with that sort of a division of things and try arbitrarily to place things in one art or another separated by rigid lines. When we do, we simply cause confusion, and, to the extent we s.ueeeed in the effort, we are likely to do injustice. I do not think that, on the whole, the motor vehicle art got very much from the railroad art. I do not think automobile engineers went there very much. The automobile was in many respects like the airplane — a wonderful new field, although it drew some parts from other transportation fields, from ■the engine building factories, and indeed went everywhere in the mechanical world to get its necessary parts and operations.

But merely because it has to do with transportation, it does not follow that the railroad is an art closely allied to motor vehicles. The automobile or truck art, as we know it, deals with vehicles that travel on the highway and it does not seem to have copied many of the things used by railroads.

In this suit, we are concerned with a part employed in connecting two vehicles together. Perhaps one would naturally look for such a structure in the various means of transportation where things have been connected together, such as the steamboat with its tow, the railroads with their trains of ears, horse-drawn vehicles connected together, and, at the date of the invention in suit, motor-driven road and farm vehicles drawn one behind the other.

It seems to me that the new type of transportation, where there was no track as in the railroad, no water as with steamboats, no horses as with farm vehicles, but, instead, motor-driven tractors and trailers operating on highways, furnished a new field, when it came to connecting the vehicles. Looking as best I can in all the world of mechanics, and particularly at what had been done in the transportation branch, this seems like a • pretty open field at the time .of this patent. Things had to be carried quite a distance, many things had to be carried, and things of considerable importance.

In doing this weighing’ and measuring, it must be conceded that it was well known that if it was desired to tow a four-wheeled vehicle on land behind another vehicle, a part of the weight of the rear vehicle could be shifted to the front vehicle by lifting the front of the rear vehicle and letting it rest on the back of the vehicle ahead. The pat-entee must be charged with that knowledge.

That this shifting of weight might be useful in increasing the friction of the driving wheels of the forward vehicle was known, but that this principle was ever used in a practical commercial way is not so apparent. The problem of finding the principle was difficult, for the principle was hidden away in patents which, while public, have a different effect in’ charging the mechanical knowledge of their contents than would a general and successful use of the principle.

This record discloses, prior to the patent in suit, no actual or commercial use of a trailer vehicle, the transfer of a part of the load of which to a towing vehicle helped its use.

In the railroad field, we have the Spangler patent of 1871 and a British patent of about the same date showing part of the weight of the car borne by the engine head. While the seed of this mechanical principle was then planted in the railroad field, it never took root nor grew, for it was planted on barren soil not adapted to it. It just died.

The great railroad transportation world did not need this principle. This conclusively appears by the fact that these many years later, the railroad is not using it. Although the thought was made known to the mechanical world, there never was a ear or train operated that employed it and today trains of ears are pulled with one car coupled behind the other in the old way, and with no part of the load of one car on the ear ahead.

Hence, as a matter of equity and fairness, aside from any technical rules of law, even if one had actually found the patent and read it and brought the idea from the railroad art to the highway art where it was needed and useful, he is entitled to more credit than he would be had he found the idea in the railroad art fully developed and in practical use helping that industry.

Carrying over an idea which had failed in its own field to a useful service in a new field should be looked at and weighed in a different way from carrying over an idea which was already in general and successful use.

As shown above, the fact that two arts run close together as to some things does not mean that they necessarily do as to others. The idea here considered w'as absolutely useless in the railroad field and yet it is the lifeblood of the tractor-trailer field. That a given idea succeeds in one field after failing in another is plain evidence that, as to this idea, the fields are remote.

The railroad and the highway may at places run side by side, yet in other places be so far apart and their' soil so different that an idea will sprout and grow in the one field of transportation and not in the other.

What I have said about the general principle of the transfer of load to the power-driven car I repeat about the incline for accomplishing the transfer. We do not find the incline in the practical railroad art because, classified as to its need for this feature, it is a different and distant art. The slanting surface by which to get the rear car onto the back of the locomotive ahead meant nothing to the railroad, and yet is highly useful in tractor-trailer combinations.

There were farm implements like hay loaders where the weight of the towed vehicle was partially borne by the vehicle ahead. While the structure was helpful in the de-sider service, the principle of increasing-traction by the transfer of load was not involved, for then vehicles were horse drawn and had no traction wheels.

While the idea of a structure resembling that under examination sprouted and grew in the farm implement field, it was not at all’ because of the principle of transfer of load. That was entirely unnecessary. Hay loader couplers with their slanting guides afford a handy way to drag the hay loader behind the wagon but there was no effort or reason to transfer load. On the contrary, the hay loaders were nearly balanced but with a little extra weight forward so that the hay loader would tilt forward instead of backward merely because it was easier to support it in this position when detached and not in use. The new function is evidence of the remoteness of the old use.

. Hollowing the discussion further, I note that while the various mechanical elements were known in these remote fields, they were not all to be found in one place. The idea that you could transfer weight to the driving wheels of the forward tractor, that you could lift the forward wheels of the rear vehicle when you were traveling, that you could use forward wheels instead of struts on the rear vehicle, that an incline could be used to elevate the load — these were not all found in one place.

The structural differences are not great. Yet in the railroad train shown in the Spang-ler patent, for instance, the weight of the truck was not carried at the rear of the locomotive because that was not needed. Indeed, there is no such need in the railroad field now. In adapting the idea to the automotive art, the patentee, among other things, moved the point of trailer support farther back on the tractor so that all the transferred weight of the trailer was carried by the driving wheels. I would not say that alone was invention, and I do not decide the case on that theory, although it is an element to be considered in weighing the patentee’s achievement.

My decision is based on the fact that in the tractor-trailer field, this idea was needed and useful and valuable and has been a really helpful thing, and that these various things from the mechanical world and from the other fields of transportation were gathered together and brought into this field and were here assembled in this useful, helpful way. One who accomplished that went beyond what the mechanic skilled in building trailers and tractors could be excepted to do. A man who would do this and could do it and did do it made an invention.

Hence claim 6 must be held valid. It is clearly infringed. It not only reads plainly on both' defendant’s structures complained of, but these structures employ just the thing that Pescatore disclosed as his invention.

Claims 3 and 4 include some features not employed by defendant and are not infringed-

Claims 1, 2, and 5 are plainly functional in form and could be saved only by interpreting each functionally defined element as meaning the corresponding structural part of the specific device illustrated and its fair mechanical equivalents. When these claims are so interpreted, they contain no inventive thought not fully, adequately, and properly set forth in claim 6. If these claims mean more than claim 6, they are - plainly void and under settled principles they should not be interpreted as covering the same breadth and scope of invention. Under these conditions, it is necessary to hold claims 1, 2, and 5 void as functional claims.

The usual decree for injunction, and reference to compute damages and loss of profits with reference to claim 6, will be entered.


author: OTIS, District Judge.

text:
    ROBINSON-DAVIS LUMBER CO. v. CROOKS, Collector of Revenue.
    No. 490.
    District Court, W. D. Missouri, S. W. D.
    Jan. 7, 1931.
    Milo Lang and George B. Lang, both of Joplin, Mo., for plaintiff.
    Sam Carmean, Asst. U. S. Atty., of Kansas City, Mo., for defendant.
   OTIS, District Judge.

This suit is brought to recover from the defendant the sum of $248.94, with interest, on account of an alleged overpayment of income tax for the years 1923 and 1924. The facts (they have been agreed upon) are these:

Plaintiff is a corporation engaged in the lumber business at Neosho, Mo. In its income tax return for the year 1924 it claimed as a deduction, among other deductions, a certain amount on account of bad debts alleged to have been ascertained, determined, and charged off during that year. Of the amount so claimed, it was subsequently determined by a representative of the Bureau of Internal Revenue that $1,991.53, although undoubtedly bad debts, should have been determined to be such and should have been charged off as such, if there was to be any allowance on account of them, in 1923 rather than in 1924. The plaintiff then filed an amended return for the year 1923 claiming a deduction on account of bad debts in that amount and asking a refund as for that year in the sum of $248.94. This was denied on the ground that, as the bad debts in question had not been ascertained and charged off during the year 1923, an allowance on account of them could not be made.

The pertinent statute (Revenue Act 1921, § 214 (a) (7), 42 Stat. 240), provides that: “In computing net incomes there shall be allowed as deductions: * * * debts ascertained to be worthless and charged off within the taxable year.”

It seems clear to me that under this statutory provision the plaintiff cannot be given a refund on account of debts which were not ascertained to be worthless and not charged off during the taxable year 1923. There must be strict compliance with this statute if relief is to be had under it. That strict compliance requires two things, the determination of the worthlessness of a debt, and the charging of that debt off on the books of the taxpayer. Neither of these two things was done by this taxpayer in the year 1923.

Certainly, where the taxpayer, as in this case, in its return for 1924 included bad debts as being ascertained and charged off within that year, the taxing authorities in the first instance may determine that these debts should have been ascertained and charged off in an earlier year. That decision may be erroneous. If it is erroneous, it may be reviewed and corrected. But there is nothing in this record which supports the conclusion that in this instance that determination was ■erroneous. Because by proper proceedings the plaintiff might have had some relief from this decision as to its 1924 taxes, it does not follow that a clearly justifiable decision as to its 1923 taxes should be overturned.

Defendant’s counsel may prepare and submit for approval and entry an appropriate decree.


text:
    REPUBLIC SUPPLY CO. v. DEL REY OIL & REFINING CO.
    District Court, S. D. California, C. D.
    June 10, 1931.
    Chandler, Wright & Ward, of Los Ange-les, Cal., for receiver.
    D. Chase Rich, of Los Angeles, Cal., for Pacific Shore Oil Co., Ltd.
    Mark F. Jones, of Los Angeles, Cal., for attaching creditors.
   JAMES, District Judge.

Proceeding to determine the validity of writ of garnishment levied by the sheriff of Los Angeles county, by which funds in the hands of Mark D. Woolery, equity receiver appointed herein, and claimed to be owing Pacific Shore Oil Company, Ltd., are sought to be impounded. The writ was served on behalf of creditors of Pacific Shore Oil Company, Ltd., in a suit brought in the state court.

The receiver, in the course of his management of the business of defendant, purchased gas from the Pacific Shore Company. On the 1st of April, 1931, gas of the value of $1,516.60 had been sold and delivered to the receiver during the month immediately preceding. Under the contract of purchase, the receiver was not obligated to settle with his vendor until the 20th of the month. The levy was made on April 3,1931.

Two questions are presented: First. Are debts due by a receiver to third parties subject to garnishment? Second. Where the amount of the debt is ascertained but time of payment, by reason of contract terms, has not arrived, irrespective of the first question just stated, may such debt be the subject of garnishment as one owing to the debtor in the attachment proceeding?

Unless otherwise changed by statute, the unvarying rule is that property in the hands of a receiver is not the subject of attachment. This for the reason that the court appointing the receiver has taken complete and exclusive control of the estate which its receiver holds and no process of a court of another jurisdiction is competent to reach it. It is not a matter of mere comity as between courts, where judicial courtesy will allow such an interference to be made. The general principle affecting that matter has been fully declared by the Supreme Court in early decisions. Speaking of the right of the court to exclude interference by the process of another court with an estate in the hands of a receiver, the Supreme Court, in Covell v. Heyman, 111 U. S. 182, 4 S. Ct. 355, 358, 28 L. Ed. 390, said: “It is a principle of right and of law, and therefore of necessity. It leaves nothing to discretion or mere convenience. These courts do not belong to the same system, so far as their jurisdiction is concurrent; and although they co-exist in the same space, they are independent, and have no common superior. They exercise jurisdiction, it is true, within the same territory, but not in the same plane; and when one takes into its jurisdiction a specific thing, that res is as much withdrawn from the judicial power of the other, as if it had been carried physically into a different territorial sovereignty. To attempt to seize it by a foreign process is futile and void.”

The statement quoted is repeated in Re Tyler, 149 U. S. 186, 13 S. Ct. 785, 37 L. Ed. 689.

The act of Congress allowing a federal receiver to be sued for any act or transaction of his has been expressly held not to include attachment or garnishment proceedings. Central Trust Co. v. East Tennessee, V. & G. Ry. Co., 59 F. 523, 529 (C. C. 6th); Central Trust Co. v. Wheeling & L. E. R. Co., 189 F. 82 (C. C.); Central Trust Co. v. Chattanooga R. & C. R. Co., 68 F. 685 (C. C.); In re Chakos, 36 F.(2d) 766 (D. C.).

The second question need not be decided, as I am clear to the point that the levy of the garnishment was wholly void; that the process of the state court has no validity to impound credits owned by third parties as against the receiver. In practice, the wisdom of the rule cannot be gainsaid. If the receiver were to be subjected to process of garnishment, he might become involved in interminable litigation and would in effect become subject to the orders of the court issuing such process.

It is ordered that the receiver disregard the writ served upon him.


author: ROBB, Associate Justice.

text:
    FAFALIOS v. DOAK, Secretary of Labor.
    No. 5008.
    Court of Appeals of District of Columbia.
    Argued Feb. 6, 1931.
    Decided May 4, 1931.
    Petition for Rehearing Denied May 18, 1931.
    Ward Bonsall, of Pittsburgh, Pa., for appellant.
    Leo A. Rover and J. W.. Fihelly, both of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB and VAN. ORSDEL, Associate Justices.
   ROBB, Associate Justice.

Appeal from a decree in the Supreme Court of the District sustaining the motion of appellee to dismiss appellant’s bill seeking the cancellation of the order of deportation and the bond given by appellant.

Appellant is a native and citizen of Greece, and entered the United States on or about September 15, 1924. He was arrested under a warrant issued by the Secretary of Labor, charged with being subject to-deportation under the Immigration Act of 1924 (43 Stat. 153, U. S. C. tit. 8, §§ 201-229 [8 USCA §§ 201-229]), in that he was not at the time of his entry in possession of an unexpired immigration visa. He was accorded a hearing at Pittsburgh, Pa., and was released on $500 bond. A subsequent hearing and a review by the Department of Labor resulted in an order that he be deported to Greece at the expense of the government, or that he depart voluntarily, without expense to the United States, to any country of his choice, except foreign contiguous territory or adjacent islands. Thereupon he filed the bill herein.

Appellee moved to dismiss on the ground, among others, that appellant has an adequate and complete remedy at law. Upon that ground the court below dismissed the bill.

The biU contains the foUowing statement: “Without surrendering to the custody of immigration officers in accordance with the terms of the iUegal order Exhibit C, plaintiff has no right to the writ of Habeas Corpus or to any other process at law; and if plaintiff surrenders to immigration officers he can only do so for the purpose of deportation, and plaintiff would thereby lose the right given him by said order Exhibit C to depart voluntarily at his own expense. * * * ” This contention is without merit. Section 19 of the Immigration Act of February 5,1917 (39 Stat. 874, 889, U. S. C. tit. 8, § 155 [8 USCA § 155]), provides that an alien who is unlawfully in this country shall be taken into custody and deported. As a matter o*f grace, the Secretary of Labor usually allows the alien the privilege of voluntarily departing from the United States, but the privilege may be revoked or withdrawn at any time. United States v. Curran (C. C. A.) 16 F.(2d) 958.

By surrending to the proper immigration officer, the writ of habeas corpus will be available to appellant. “The court then, for the time being, having control of the person of the relator, may determine the facts of the case and dispose of him as law and justice require.” Sibray v. United States (C. C. A.) 185 F. 401, 404. In other words, the writ will accord him an adequate and complete remedy. Should appellant’s contention be sustained, every alien, by merely giving bail, might test the legality of the deportation proceedings through a bill in equity in the District of Columbia, instead of through a writ of habeas corpus in the proper district.

The decree is affirmed.

Affirmed.


author: WILKERSON, District Judge.

text:
    MARIETTA MFG. CO. v. FEDERAL TRADE COMMISSION.
    No. 4435.
    Circuit Court of Appeals, Seventh Circuit.
    June 16, 1931.
    Rehearing Denied July 25, 1931.
    Charles-0. Roemler, Ralph 0. Lockwood, and Yirgil H. Lockwood, all of Indianapolis, Ind., for petitioner.
    Robert E. Healy, Chief Counsel Federal Trade Commission, Martin A. Morrison, Asst. Chief Counsel, Federal Trade Commission, and Alfred M. Craven, all of Washington, D. C., for respondent.
    Edwin H. Cassels, of Chicago, 111. (Thomas J. Downs and Cassels, Potter & Bentley, all of Chicago, 111., of counsel), for National Ass’n of Marble Dealers, amicus curiae.
    Before EYANS and SPARKS, Circuit Judges, and WILKERSON, District Judge.
   WILKERSON, District Judge.

The Marietta Manufacturing Company for twenty years has manufactured and sold a product used for interior walls, wainscoting, ceilings, table tops, counters, and other like purposes. This product has been advertised and sold as “Sani-Onyx, a Yitreous Marble.” It is not a product of nature. It is neither a marble nor onyx. Its chief ingredient is silica, and it is manufactured in slab form and may be used in place of natural or quarried onyx or marble when such onyx or marble is in slab form. It is made in a great variety of colors, and in some of its colors it resembles marble and in others a type of onyx.

The Federal Trade Commission instituted a complaint under section 5 of the Act of September 26, 1914, c. 311, 38 Stat. 717, 719 (15 USCA § 45). After appropriate proceedings an order was issued requiring the company to cease and desist from (1) using the term “Sani-Onyx, a Yitreous Marble,” or the term “Sani-Onyx,” as a designation of the product manufactured by it, and (2) representing in its advertising matter, or by other means, that the product which it manufactures is marble, or onyx.

The order of the commission rests upon findings of fact as follows:

The company’s product is in competition with quarried marble and onyx. In order to create a demand for its product, the company advertises in periodicals and sends out trade circulars. In such advertising the ■ company designates its product as “Sani-Onyx, a Yitreous Marble,” or “Sani-Onyx,” and makes use of statements like the following: “Sani-Onyx, a Yitreous Marble. Truly modem is this new material for bathroom and kitchen walls, ceilings, wainscoting. Sani-Onyx offers distinctive surface textures with colors of rare and exquisite beauty. No substitute or makeshift. Sani-Onyx is a superior product fused from rock ingredients. ‘What is Sani-Onyx?’ Emphatically Sani-Onyx is not a ‘substitute’. It is a superior modem day material for walls, ceilings, wainscoting — wherever in the past you have been forced to use conventional plaster, tile or marble.”

This product is not ;a- product of nature, but is a manufactured product, the chief ingredient of which is silica. Among the company’s competitors are marble dealers who sell marble and onyx, wbieb are put to substantially the same use as the company’s product. In addition to color, the product has other characteristics, so that under certain conditions it may be used as a substitute for natural onyx or .marble and to that extent may be said to be artificial onyx or marble. The designation by the company of its product is false and misleading and has a tendency and capacity to deceive purchasers thereof into the belief that it is onyx or marble and to cause them to purchase it in that belief.

The findings as to the nature of petitioner’s product, its resemblance in appearance, in some of its forms, to marble and onyx, and its use as a substitute for natural marble or onyx, are sustained either by the admissions of petitioner in its answer before the commission or by the evidence, including the physical exhibits, in the record.

Petitioners assert' that the commission’s finding that the designation of petitioner’s product is false and misleading and has the tendency and capacity to deceive purchasers into the belief that the product is onyx or marble is not sustained by the proof. The product, it is asserted, is sold for the most part to jobbers, contractors, and builders, who could not possibly be misled by the designation or by anything in the advertising into the belief that they were purchasing a kind of marble or onyx. A method of competition, inherently unfair, does not cease to be unfair because the falsity of the manufacturer’s representation has become so well known to the trade that dealers, as distinguished from consumers, are no longer deceived. The honest manufacturer’s business may suffer, not merely through a competitor’s deceiving his direct customer, the retailer, but also through the competitor’s putting into the hands of the retailer an unlawful instrument, which enables the retailer to increase his own sales of the dishonest goods, thereby lessening the market for the honest product. Federal Trade Commission v. Winstead Hosiery Co., 258 U. S. 483, 494, 42 S. Ct. 384, 66 L. Ed. 729. It may be that building contractors were not deceived. Petitioner, however, carried on an advertising campaign, the effect of which was to create in the minds of the public the belief that this product was a kind of marble and lead them to deal with it as such .in agreeing to specifications or buying houses. The designation was adroitly selected and the advertisements cunningly framed so as to go as far as possible in giving the false impression without transcending' the limits of literal truth, except in the use of the words “marble” and “onyx.” “Sani-Onyx,” it is stated, “is a superior product, fused from rock ingredients.” The word “vitreous” has some application to the product, but “marble” and “onyx” are wholly inapplicable.

Labeling and advertisements of the kind described in the findings and shown by the record constitute an unfair method of competition, which the Trade Commission has authority to forbid. Federal Trade Commission v. Winstead Hosiery Co., supra; Federal Trade Commission v. Kay (C. C. A. 7) 35 F.(2d) 160, 162; Masland Duraleather Company v. Federal Trade Commission (C. C. A. 3) 34 F.(2d) 733; Indiana Quartered Oak Company v. Federal Trade Commission (C. C. A. 2) 26 F.(2d) 340; Royal Baking Powder Co. v. Federal Trade Commission (C. C. A. 2) 281 F. 744.

The fact that “Sani-Onyx” is registered as a trade-mark is no protection to petitioner, if the trade-mark is used as a part of an unfair method of competition. Federal Trade Commission v. Winstead Hosiery Co., supra, 258 U. S. page 494, 42 S. Ct. 384, 66 L. Ed. 729; Federal Trade Commission v. Kay, supra.

Petitioner urges that, even though it is forbidden to represent its product to the public as a “vitreous marble,” it should be permitted to retain the designation “Sani-Onyx.” Petitioner, by a long course of advertising, has given to the word “San-Onyx” a meaning. Its own definition of the word is “a vitreous marble.” If it is permitted to retain this designation of its product, it reaps a large part of the benefit resulting from advertising its product as a marble.

The petition is denied.


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    NATIONAL PRESSURE COOKER CO. v. STROETER.
    No. 4487.
    Circuit Court of Appeals, Seventh Circuit.
    June 13, 1931.
    Rehearing Denied July 25, 1931.

      T. M. Holland, P. M. Beach, and Bundy, Beach & Holland, all of Eau Claire, Wis., for appellant.
    Fred Arnold, of Eau Claire, Wis.,' and Harry F. Payer, of Cleveland, Ohio, for ap-pellee.
    Before EVANS and SPARKS, Circuit Judges, and WTLKERSON, District Judge.
   WILKERSON, District Judge.

Plaintiff (appellee here) recovered a judgment for damages resulting from the explosion of a steam pressure cooker sold by defendant (appellant here). The complaint charges that in the booklet furnished with the cooker it was represented that this kind of cookers had been tested, approved, and indorsed by efficiency experts; that the cooker was a simple household utensil, easy to use, and that any kind of cooking except broiling could be done in it; that, while the plaintiff was using it in strict conformity to the regulations prescribed for its use, it exploded ; that defendant knew that the cooker was inherently dangerous and likely to result in injury to the user. The specifications of negligence are (1) constructing the cooker in such a way that, when certain vegetables were cooked therein, the peteoek, safety controls, and other parts of the cooker were clogged so as to prevent the escape of steam and cause an explosion; (2) failing to examine and test the cooker before it was sold; (3) assuming to give instructions and being under obligations to give full instructions as to the use of the cooker, and then failing to give warning of the danger incident to the use of the cooker when used in the usual and customary manner; (4) representing that the cooker was a simple harmless household utensil, easy to use, thoroughly tested, and properly equipped.

The booklet sent with the cooker contained a diagram, showing the construction of the cooker and directions for its use, including the following: “Fasten the cover in position, screwing the wing nuts on the bolts, tightening them alternately around the cover so that it may be in place evenly, all around to form an air tight and steam tight joint. * * * When steam pressure begins, open the peteoek to release cold air until steam begins to come out, then close it. 51 * ! If the cover has been properly fastened, no steam will escape around the cover. * * • When the cooking period is completed there are two ways of reducing the pressure before opening the cover (a) by unscrewing the petcock, thus allowing the steam to escape; (b) by condensation, or allowing the cooker to cool slowly without opening the peteoek. As the steam is released, the indicator on the dial will gradually return to zero. As soon as the steam is all out, open the peteoek to overcome the vacuum, then the cooker may be opened by unscrewing the wing nuts. * * * Do not loosen the wing nuts to remove the cover until all the steam pressure has been released, as shown by the indicator on the dial pointing to zero. * * Don’t let the steam out too rapidly, otherwise the liquid contents may boil over or be drawn out of the dishes. * * * Don’t unscrew the wing nuts after cooking until the indicator on the dial points to zero. * * * ”

Plaintiff undertook to cook some chili sauce in the cooker. A part of the mixture was tomatoes from which the seeds had not been removed. Plaintiff testified that she followed the directions contained in the booklet, and, after the mixture had cooked long enough, unscrewed the petcock. When the steam pressure gauge had gone down to zero, she unscrewed the wing nuts in pairs, taking the two opposite ones at a time. While she was in the act of unscrewing the last or seventh wing nut, the lid of the cooker suddenly lifted up. There was an explosion, and the scalding mixture was thrown on her.

Defendant undertook to show that the explosion could not have occurred in the manner described if plaintiff had followed the' directions. Plaintiff claimed that the tomato seeds had clogged the openings and interfered with the operation of the petcock and steam gauge. Defendant, in reply to this, asserted that, in accordance with well-known laws of physics, the tomato seeds could not have reached the openings during the process of cooking under steam pressure, and that the seeds found in the openings were thrown there by the explosion, which, it could be demonstrated scientifically, must have been due to plaintiff’s own negligence.

Defendant asserts that the court should have directed a verdiet in its favor. Such an instruction, of course, should not have been given, if, taking the evidence most favorably to the plaintiff, there was proof to sustain any one of the specifications of negligence in the complaint. Whatever may be said about the laws of nature and the movement of the tomato seeds, one of the charges in the complaint is that defendant represented that the cooker was a simple household utensil and failed to give any adequate warning of the serious consequences which would follow a failure to comply with the directions for its use. We are satisfied from a reading of the directions that this question presented a jury issue and that there was some evidence tending to sustain plaintiff’s averments.

Appellant assigns as error the striking out of the testimony of a witness (West) that, in his experience, no seeds or other particles of food had ever gone into the openings which lead to the safety valve, the pressure gauge, or the petcock; the refusal to permit the witness to testify that all other manufacturers of similar cookers equip them with a similar petcock and gauge; and the refusal to allow experiments to be made in court to show that the seeds could not get into the openings.

In our opinion the rulings of the court, as shown by the record, were correct. The testimony of the witness as to his experience with tomato seeds was too general and indefinite to be permitted to stand. What would happen under one set of conditions might not prove a safe guide as to what would happen under different conditions. The testimony as to the use of similar appliances by other manufacturers was not admissible. The judgment of others as to the safety of a given device cannot be given to the jury in this indirect way and without the opportunity for cross-examining the one who has exercised the judgment. The rulings as to the experiments in court covered a matter within the discretion of the court. In view of the difficulty, if not the impossibility, of reproducing the exact situation, it cannot be said that the trial judge abused his discretion. Other errors are assigned as to the rulings on evidence. An examination of the record satisfies us that they are either without merit or of such a character that they did not have the slightest effect upon the verdict in the case.

The judgment of the District Court should be and is affirmed.


author: ALSCHULER, Circuit Judge.

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    PETERSON et al. v. BORDEN CO. et al.
    No. 4498.
    Circuit Court of Appeals, Seventh Circuit.
    June 11, 1931.
    Rehearing Denied July 16, 1931.

      Francis W. Marshall, of Chicago, Ill., for appellants.
    Cutting, Moore & Sidley, Donald F. McPherson, James F. Oates, Jr., and John Paulding Brown, all of Chicago, Ill., and Beverley R. Robinson, of New York City., for appellees.
    Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.
   ALSCHULER, Circuit Judge.

Plaintiffs appeal from the judgment dismissing their suit, after the sustaining of the demurrer to their declaration.

• As stated in plaintiffs’ brief: “This action was brought to recover damages for injury to plaintiffs’ property caused by the alleged violation of the antitrust laws by the defendants as provided in U. S. Code, title 15, § 15 [15 USCA § 15]. The section of the antitrust laws alleged to have been violated is Title 15, Section 18.”

The declaration charged in substance that plaintiffs owned 315 shares of the Clover Leaf Milk Company, an Illinois corporation engaged in interstate commerce in milk in competition with the corporate defendants, who were likewise engaged in such interstate commerce; that the two individual defendants named in the declaration (but not served with summons, and -not appearing in the action) owned a majority of the stock of the Clover Leaf Milk Company, and were its controlling officers and directors; that the individual defendants had arranged with the corporate defendants, or one of them, for the acquirement by the corporate defendants of all the assets of the Clover Leaf Milk Company in exchange for 8,000 shares of stock of defendant the Borden Company, and that in order to carry out the project it was necessary to acquire the said stock of plaintiffs; that the individual defendants conspired together for the acquirement of said stock, and by means of false representations by said individual defendants to the plaintiffs the individual defendants succeeded in purchasing plaintiffs’ stock at the price of $535 a share, when in fact the said stock was worth $1,000 a share; that the corporate defendants entered into the conspiracy to so defraud plaintiffs by supplying to the individual defendants cash to the extent of $181,-000 to enable the purchase to be made; that thereupon the individual defendants' caused to be conveyed to the corporate defendants, or one of them, all the assets of the Clover Leaf Milk Company, and the corporate defendants delivered to said Clover Leaf Milk Company 8,000 shares of the stock of the Borden Company, and that thereupon the Clover Leaf Milk Company changed its name, and shortly thereafter the corporation was dissolved; that prior to the said transactions the corporate defendants, or one of them, and the Clover Leaf Milk Company were in competition in the milk business in the city of Chicago, but that upon the purchase by the corporate defendants of the assets of the Clover Leaf Milk Company, and the dissolution of the latter, competition between them ceased, and that the effect of the transaction was to substantially lessen competition and to create a monopoly, contrary to the provisions of the federal anti-trust laws; that the property of plaintiffs was thereby damaged by the difference between the value of their said stock, which was $315,-000, and the amount of $168,525, which it actually received for it. Treble damages and attorneys’ fees, as provided in the statute, are demanded.

Whatever of other infirmities the declaration may disclose, we are met at the outset with the utter want of causal relation between the alleged injury to plaintiffs and the alleged statutory transgression by any of defendants. The statute was not designed to give to stockholders who have been defrauded in the sale of their stock treble damages for their injuries, nor indeed any new or additional remedy for such injury. If they have been thus defrauded, the law aside from the anti-trust statutes affords ample remedy. The sale of corporate stock holds no different relation toward the statute here invoked than would a horse trade, or any other transaction between parties.

Assuming the declaration to charge sufficiently that the corporate defendants had directly or indirectly acquired the Clover Leaf Milk Company’s stock, the right of action given to persons injured through the resultant tendency to substantial lessening of competition or ereation of monopoly would include such injury only as such tendency to lessen competition or to create monopoly engendered. We do not understand how a stockholder of an absorbed corporation who parted with his stock for less than its actual value can attribute his loss to the substantial lessening of competition or the ereation of monopoly through acquirement of the corporate stock by a corporate competitor. The competition destroyed or the monopoly created could not injure him in his relation as a. stockholder of the acquired corporation, since he had parted with his stock.

If he has sustained injury in the sale of his stock through the fraudulent conduct of the purchaser he does not thereby become a “person who shall be injured in Ms business or property by reason of anything forbidden jn the antitrust laws,” to whom alone right of action is given by section 15.

The declaration falls far short of stating a cause of action, and the judgment of the District Court is affirmed.