author: MARTIN, Chief Justice.

text:
    BURNET, Commissioner of Internal Revenue, v. JOHN F. CAMPBELL CO.
    No. 5121.
    Court of Appeals of District of Columbia.
    Argued April 10, 1931.
    Decided May 4, 1931.
    C. M. Charest, Sewall Key, and John G. Remey, all of Washington, D. C., for appellant.

      Harry Friedman and John F. Riehter, both of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, YAN ORSDEL, HITZ, and GRO-NER, Associate Justices.
   MARTIN, Chief Justice.

This ease involves income taxes for the years 1922 and 1923.

The record discloses that in the years 1920, 1921, 1922, and 1923, the John F. Campbell' Company, a corporation, was engaged in the sugar and rice brokerage business in the city of Chicago. Its books during these years were kept on the accrual basis. In 1920 the- corporation became indebted to the B. H. Howell Son & Co. and the Colonial Sugar Company for goods purchased to the extent of $24,700.and $114,200, respectively. In satisfaction of these obligations, the creditors agreed, on January 21, 1921, to accept $2,500 in cash and a 75 per cent, interest, amounting to $88,788.05, in certain accounts receivable held by the corporation against other parties. Also in 1921 certain other creditors of the corporation agreed to accept the sum of $4,436.59 in satisfaction of debts amounting to $6,882.-15 owing to them by the corporation on account of goods purchased. As a result of these agreements a total indebtedness of $50,087.51 owing by the corporation was canceled or forgiven during the year 1921 by its creditors.

In its income tax return for 1921, the taxpayer reported a net loss of $50,545.64 from the operation of its brokerage business. During the years 1922 and 1923 the taxpayer derived a net income from the operation of its business of $4,018.22 and $34,755.43, respectively. In its income tax returns for 1922 and 1923, the taxpayer carried forward the net loss of $50,545.64, which it had reported for 1921, and applied it against the net income from its business for the latter years.

The Commissioner reduced the net loss reported by the taxpayer for 1921 to $458.13 by including as income within the return for that year the sum of $50,087.51, representing the amount of the taxpayer’s indebtedness which had been canceled by its creditors during the year. This action reduced the loss for 1921 to be carried over to 1922 and 1923, and resulted in proposed deficiencies in the taxpayer’s taxes in the sum of $252.28 for 1922 and $4,344.43 for 1923.

The Commissioner in reporting this re-determination to the taxpayer gave in part the following explanation: “The discharge of indebtedness in 1921 by an agreement with the debtors to take a cash payment and certain securities receivable held by your corporation in full settlement of an indebtedness larger than the cash payment and securities so taken is held to be a cancellation of part of the indebtedness without desiring to benefit the debtor, and the amount canceled constitutes income to your corporation in 1921. * * * ”

The action of the Commissioner was reviewed by the Board of Tax Appeals, 15 B. T. A. 458, and the ruling was held to be erroneous. The Board held that in this case the cancellation of indebtedness did not amount to taxable income. The present proceeding is brought to review that decision.

We agree with the Board’s decision. It is plain that early in 1921 the taxpayer was in financial distress, and was probably insolvent, and that its creditors canceled part of their claims against it in order to secure payment of the balance of their claims. This relief enabled the taxpayer to continue business and to realise a profit in thé years 1922 and 1923. It is phblie history that the time in question witnessed great disturbance in such business as the taxpayer was then engaged in.

.This forbearance did not produce taxable income to the taxpayer. “Income” within the purview of the Revenue Acts has been defined to be “gain derived from capital, from labor,'or from both combined,” and includes “profit gained through a sale or conversion of capital assets.” Stratton’s Independence v. Howbert, 231 U. S. 399, 415, 34 S. Ct. 136, 140, 58 L. Ed. 285; Doyle v. Mitchell Bros. Co., 247 U. S. 179, 185, 38 S. Ct. 467, 62 L. Ed. 1054; Eisner v. Macomber, 252 U. S. 189, 206, 207, 40 S. Ct. 189, 64 L. Ed. 521, 9 A. L. R. 1570. “In determining the definition of the word fin-come’ thus arrived at, this Court has consistently refused to enter into the refinements of lexicographers or economists, and has approved, in the definitions quoted, what it believed to be the commonly understood meaning of the term which must have been in the minds of the people when they adopted the Sixteenth Amendment to the Constitution.” Merchants’ L. & T. Co. v. Smietanka, 255 U. S. 519, 41 S. Ct. 386, 389, 65 L. Ed. 751, 15 A. L. R. 1305. We do not believe that the term “income” as commonly understood applies to the partial cancellation by a creditor of a debt due to him from a disabled debtor, in order that such debtor may thereby be enabled to pay the balance of the debt. “The fact that after the transaction the plaintiff’s balance sheet had improved was not sufficient to constitute ‘a gain derived from capital.’ If anything, it was a gain accruing to capital, and, as such, under the Eisner [252 U. S. 189, 40 S. Ct. 189, 64 L. Ed. 521, 9 A. L. R. 1570], and Phellis Cases [257 U. S. 156, 42 S. Ct. 63, 66 L. Ed. 180], was not taxable income.” Ker-baugh-Empire Co. v. Bowers (D. C.) 300 F. 938, 944, affirmed 271 U. S. 170, 46 S. Ct. 449, 70 L. Ed. 886.

This view has been consistently taken by the Board of Tax Appeals in many similar cases, beginning with Appeal of Meyer Jewelry Co., 3 B. T. A. 1319, decided January 26, 1926. See Appeal of Independent Brewing Co., 4 B. T. A. 870; Appeal of New Orleans, etc., Ry. Co., 6 B. T. A. 436; Houston, etc., Ry. Co. v. Com’r of Internal Revenue, 6 B. T. A. 1364; Indianapolis St. Ry. Co. v. Com’r of Internal Revenue, 7 B. T. A. 397; A. M. Lawrence v. Com’r of Internal Revenue, 13 B. T. A. 463; American Seating Co. v. Com’r of Internal Revenue, 14 B. T. A. 328; Douglas Co. L. & W. Co. v. Com’r of Internal Revenue, 14 B. T. A. 1052; Simmons Gin Co. v. Com’r of Internal Revenue, 16 B. T. A. 793; Eastside Mfg. Co. v. Com’r of Internal Revenue, 18 B. T. A. 461; Kirby Lumber Co. v. Com’r of Internal Revenue, 19 B. T. A. 1046; Progress Paper Co. v. Com’r of Internal Revenue, 20 B. T. A. 234; American Tob. Co. v. Com’r of Internal Revenue, 20 B. T. A. 586; Houghton & Dutton v. Com’r of Internal Revenue, 20 B. T. A. 591.

We think this disposes of the only issue effectually presented by the record, and accordingly we affirm the decision appealed from.


source: Caselaw Access Project

license: Public Domain

text:
    ARKANSAS LAND & LUMBER CO. v. BURNET, Commissioner of Internal Revenue.
    No. 5103.
    Court of Appeals of District of Columbia.
    Argued April 10, 1931.
    Decided May 4, 1931.
    W. W. Spalding, of Washington, D. C., for appellant.
    Sewall Key, R. L. Williams, C. M. Char-est, and Helen R. Carloss, all of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRO-NER, Associate Justices.
   MARTIN, Chief Justice.

This case- involves alleged deficiencies of the petitioner in income and profits taxes for the calendar years 1921, 1922,° and 1923, in the amounts of $4,746.72, $4,792.76, and $2,-796.49, respectively, as determined by the Commissioner, and approved by the Board of Tax Appeals.

The record discloses that prior to Mareh 1,1913, the petitioner acquired in fee certain contiguous tracts of timber lands and the timber thereon, aggregating 50,025.04 acres, and also the timber on other adjacent tracts aggregating 3,623 acres, all located in the state of Arkansas. At a time' later than Mareh 1, 1913, it acquired a sawmill plant, logging equipment, and various other items of personal and real property for use in' ite business of logging and lumber manufacturing.

Some time prior to 1921, tbe petitioner offered to sell all of this property to the Wisconsin & Arkansas Lumber' Company, whieh owned an adjacent tract of timber then substantially depleted, having a sawmill and other equipment fully adequate to log and cut economically all the timber owned by both concerns. The proposed purchaser, however, desired to buy only the timber land and timber owned by the petitioner.

After negotiations extending over a year, the parties on November 2, 1921, entered into a written contract whereby the purchasing company purchased the timber lands and standing timber owned by the petitioner, at the price of $759,000. On the same day the parties entered into a second written contract whereby the petitioner sold to the same company the lumber manufacturing plants and all buildings used in connection therewith, including certain 112 aeres of land, and also all personal property of every description then owned by the petitioner, including cash, bank deposits, bills and accounts receivable, logging railroad and equipment, and eboses in action, at the price of $124,000 cash and four promissory notes in the sum of $84,000 each, payable respectively in 3, 6, 9, and 12 months after date, the vendee company also, agreeing to pay all the liabilities of the petitioner as of that date. In the latter contract the execution of the first or land contract was recited as part consideration therefor.

The assets transferred by the second contract and the obligations assumed by tbe purchasing company, with book values and depreciation reserves to which the parties agreed, are fully set out in the record. The cost of the personal property, which was acquired by the petitioner after March 1,1913, including plant, railroad and its equipment, lumber, merchandise, and note and accounts receivable, less liabilities assumed by tbe ven-dee company, is shown to be $796,928.21. The sales price, to wit, $124,000 cash and four promissory notes for $84,000 each, aggregates $460,000, and show a net loss by petitioner of $336,928.15, by comparison between tbe cost and selling price of the property.

In its ineome and profits tax return for •1921, the petitioner reported neither taxable gain nor deductible loss resulting from the sale of its timber lands under the first contract, inasmuch as . these had been purchased prior to March 1,1913, at a cost less than the selling price, but not more than their fair market price or value as of March 1, 1913. Section 202 (b) (3), Revenue Act of 1921 (42 Stat. 230). But petitioner claimed a loss of $615,444.22 alleged to have been sustained by it in 1921 in the condnet of its business increased by the loss suffered as aforesaid in the sale of its personal property. This loss was carried forward by petitioner and applied to its gross ineome for the years 1922 and 1923, whereby petitioner reported no tax liability for either 1921, 1922, or 1923. Section 204 (b), Revenue Act of 1921 (42 Stat. 231).

The Commissioner, upon audit of this return, held that the two written contracts of sale actually provided for the sale of a single body of capital assets, and that, as the entire property had been sold for more than cost, but less than its fair market price or value on March 1,1913, neither taxable gain ot deductible loss from the transaction could be recognized for ineome tax purposes. The Commissioner accordingly disallowed the net losses claimed by. petitioner, and determined the deficiencies upon the amended returns to ■ be $4,746.72, $4,729.76, and $2,796.49, respectively, for the years 1921, 1922, and 1923, and the Board of Tax Appeals sustained this action. 15 B>. T'. A. 829.

We cannot agree with the Commissioner’s ■determination. It rests upon the assumption indulged by the Commissioner that the two Written contracts whieh were separately executed and delivered by and between the several parties constituted but a single contract of sale for ineome tax purposes. This assumption is without foundation. At the time of the negotiations between the parties, the petitioner owned two kinds or classes of property, although both were used in the operation of its business. One class consisted of real estate whieh had been purchased before March 1,1913. The other class consisted of personal property, all of which had been acquired after March 1,1913. Different methods of assessing income taxes apply to these classes of property. The parties bargained for the properties as separate units,, and finally executed a separate written instrument for the sale and conveyance of each unit. This was not unlawful, and the good faith of the transaction is not questioned. It is probably true that the petitioner would not have sold the timber lands without at the same time selling the personal property, but that fact does not convert the several sales into a single sale. Various cas.es are cited on behalf of the Commissioner wherein separate but concurrent contracts between the same parties concerning the same subject-matter have been interpreted or construed together as if constituting but a single contract, for the purpose of ascertaining the true intent of the parties. But this is far from holding that such contracts actually constitute but a single contract.

Accordingly, the deficiencies determined by the Commissioner and redetermined by tbe Board are reversed and set aside, and-this cause is remanded to the Board for such further proceedings as may be consistent herewith.

Reversed.


text:
    McCAUSEY v. BURNET, Commissioner of Internal Revenue. WOLF v. SAME.
    Nos. 5077, 5078.
    Court of Appeals of District of Columbia.
    Argued April 9, 1931.
    Decided May 4, 1931.
    Lawrence A. Baker and Henry Ravenel, both of Washington, D. C., for appellants.
    Sewall Key, C. M. Charest, and J. H. Me-Evers, all of Washington, D. C., for appel-. lee.
    Before MARTIN, Chief Justice, and ROBB) VAN ORSDEL, HITZ, and GRO-NER, Associate Justices.
   MARTIN, Chief Justice.

Petitions involving income taxes for the years 1919, 1920, and 1923, to review orders of the Board of Tax Appeals of April 16, 1929. 16 B. T. A. 8.

These causes arise upon a refusal of the Commissioner to allow the deduction of certain losses alleged to have been suffered by petitioners in a transaction involving the purchase and sale of certain bank stocks. The Commissioner’s determinations were sustained by the Board, whereupon these petitions were filed.

It appears that in the year 1919 the taxpayers McCausey and Wolf were officers and stockholders of the Commonwealth Savings Bank of Detroit, Mich., and that together with eighteen other stockholders of the bank they formed a syndicate to purchase a controlling interest in the Federal State Bank of Detroit, with a view to consolidating the two banks. In pursuance of this project, the syndicate purchased 1,716 shares of federal bank stock at the price of $182.83 per share, the total cost being $313)732.50, and this gave it a controlling interest in that bank. The syndicate borrowed the money with which to pay for the stock on notes signed by its individual members. The two banks were then merged under the name of the C'ommon-Wealth-Federal Savings Bank, and stock was issued by the consolidated bank and exchanged share for share for the stoek of the constitutent banks. The syndicate accordingly received 1,716 shares of the stock of the new bank in exchange for the 1,716 shares held by it in the federal bank.

The syndicate then offered this stock for sale, and succeeded in selling 367 shares to persons other than its members, at a price of $110 per share. The remaining shares, 1,349 in number, were “sold” at the same price to its members. The syndicate accordingly realized the sum of $188,766 for the stock handled by it, as compared with the sum of $313,732.50 which was originally paid for it. A payment of $50,000 was made in 1919 on account of the liability incurred by the syndicate in the purchase of the federal bank stock, of which amount McCausey paid $5,-239, and in 1920 he paid $2,700: on the same liability. In 1923 "Wolf paid $8,000.16 as part of the liability incurred by him as a member of the syndicate in satisfaction of the syndicate loss. These amounts were deducted by the respective parties in their income tax returns for the appropriate years as losses sustained in such years. The Commissioner disallowed the deductions, the Board sustained this ruling, and the issue is thus before us.

In our opinion the records do not sustain the claims of the taxpayers. The transaction whereby the syndicate received 1,716 shares of the stock of the consolidated bank in exchange for 1,716 shares of stock of the federal bank did not result in any taxable gain or loss. This statement is sustained by section 202 (b) Revenue Act of 1918 (40 Stat. 1060), which reads in part as follows: “But when in connection with the reorganization, merger, or consolidation of a corporation a person receives in place of stock or securities owned by him new stock or securities of no greater aggregate parlor face value, no gain or loss shall be deemed to oecur from the exchange, and the new stock or securities received shall be treated as taking the place of the stock, securities, or property exchanged.”

Accordingly, if the syndicate as such had filed a separate income tax return while still retaining title to the consolidated stock, no deduction for loss would have been allowed for the transaction, notwithstanding that the federal stock had cost it $313,732.50, whereas it appraised the consolidated stock at only $188,760. We are of the opinion that the same rule applies to that portion of the stock which was afterwards transferred by the syndicate to its individual members. The syndicate was not a corporation, nor was it a partnership or other separate legal entity. It was no more than a “joint adventure”; that is, a “special combination of two or nlore persons, where in some specific venture a profit is jointly sought without any actual partnership or corporate designation.” Bou-vier’s Law Dictionary, “Syndicate”; 33 C. J. 841, “Joint Adventures.” Accordingly, when the federal bank stock was purchased by the syndicate, it became the property of the members thereof, and, when the consolidated bank stock was received in exchange, the members of the syndicate became the owners of it, and, so far as appears, continue to own it. The subsequent distribution of the stock among the members was not a sale, but simply a division of the shares among the joint owners. The transaction'still fell within the rule prescribed by section 202 (b), supra.

There were, however, 367 shares of the consolidated bank stock which were actually sold to persons other than syndicate members at the price of $110 per share, and this resulted in a loss to the syndicate members. The records, however, do not disclose facts sufficient to allocate to petitioners definite proportions of such loss.

The decisions of the Board of Tax Appeals are affirmed.


author: GRONER, Associate Justice.

text:
    CORBETT v. BURNET, Commissioner of Internal Revenue.
    No. 5122.
    Court of Appeals of District of Columbia.
    Argued April 10, 1931.
    Decided May 4, 1931.

      John E. Hughes and William Cogger, both of Washington, D. C., for appellant.
    G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, Hayner N. Larson, and C. M. Charest, all of Washington, D. C., for appel-lee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRO-NER, Associate Justices.
   GRONER, Associate Justice.

This is an appeal from a decision of the Board of Tax Appeals approving in part a deficiency tax imposed by the Commissioner on appellant for the year 1921.

Appellant, who resides in Florida, filed his income tax return for the year 1921 in which he showed a profit of $54,349.40 derived from the sale of 200 shares of the stock of Melville-Corbett Company. In 1926, the Commissioner increased the return in the sum of $13,859.10 because he found that appellant also owned a 34 per cent, interest in a partnership which in turn, owned 150 shares of the same stock sold at the same price and at the same time as appellant’s individual stock. The additional assessment was based on the identical amount of profit per share shown by petitioner in his income tax return to have resulted from the sale. Appellant first insisted that, if he bad to pay this additional tax, he was entitled to set off against it certain losses which he claimed he had sustained in the same year and for which no allowance had been made, but, before the hearing by the Board, he amended his petition so as to claim the benefits of sections 212 and 1208 of the Revenue Act of 1926, 26 ÜSCA §§ 953, 953a (the installment sales section), and, at the hearing on his petition, the Board found that in 1921 appellant, as the owner, directly or indirectly, of 251 shares of stock of the Melville-Corbett Company, together with the holders of 249 shares, making 500 shares of a total issue of 1,000 shares, had agreed to sell and had sold the same to the Miner-Edgar Company, the owner of the other 500 shares, and that the consideration for the sale was $10,000 in cash, three notes of the Miner Company, indorsed by the Melville Company for $5,000 each, payable in 2, 4, and 6 months, respectively, ten notes of the Miner Company, indorsed by the Melville Company, for $8,300 each, payable, as to one, May 1, 1922, and thereafter one on each subsequent six months, and a bond of the Melville-Corbett Company for $80,000, payable as to $8,000 thereof on May 1, 1927, and $8,000 each 6 months thereafter until fully paid, and secured by mortgage on the plant and property of that company.. The Board found that this particular transaction was a sale, and that the Commissioner had correctly ascertained the gain arising therefrom under section 202(a) of the Revenue Act of 1921, 42 Stat. 227, 229. The Board, however, did not pass upon the question whether the sale was an installment sale, and therefore whether appellant was entitled to the benefits of section 212(d) of the Reve-' nue Act of 1926, 26 USCA § 953(d).'

After the decision was announced, appellant filed a petition asking the Board to reconsider and to hold that the transaction in question was not a sale, but an exchange of property under section 202 (e) (1) of the Revenue Act of 1921 (42 Stat. 230). The Board declined to amend, and appellant filed his petition for appeal to this court.

The evidence certified up is more confusing than enlightening, but enough appears, we think, to justify us in holding that there was substantial evidence from which the Board could reasonably find that the Commissioner was correct in ruling that the transaction was a sale and the profit therefrom taxable under 202 (a) Act of 1921, and also that the notes and the bond had, as of the time of their delivery, a present market value equal to their face value. The total purchase price of the 500 shares of stock was $188,-000. The purchaser was the owner of the remaining 500 shares. It paid $10,000 in cash, $15,000 additional within six months, and, as nearly as we can determine from the evidence, also paid the ten notes aggregating $83,000 maturing each six months after the sale. Some doubt is thrown on this last-men-tinned payment in the opinion of the Board, though in the evidence of appellant he seems to us clearly to have testified that all the notes were paid, and that the interest on the $80,000 bond was likewise paid up1 to 1927, and only the principal sum of the bond remains due, and the pleadings, though far from clear on this subject, would indicate this also ; so that, assuming the transaction to have been a “salei” rather than an “exchange,” all that remains is to determine whether there is sufficient evidence to sustain the Commissioner’s conclusion that the notes and bond had then a fair market value equal to their face value. When the bond was delivered, it was secured by a mortgage on a going company worth presumably, if the price the purchaser was willing to pay be taken as a criterion, approximately four times the amount of the bond, and it was agreed to be additionally secured, and presumably was secured, by an indemnity bond executed by the purchaser in double the amount of the debt. On the other hand, the only evidence as to tack of value on the part of the bond is that of appellant himself, and this is thoroughly unsatisfactory. When he was asked upon what he predicated his statement that the bond had little value, he said: “The elements which entered into my statement saying that I did not think the bond or mortgage had any market value when I had it were the credit of the people who took it over was hot good, the Miner-Edgar people. The Melville-Corbett Company had a lot of assets and goods making and everything that that stock represented, They were a going concern with a lot of assets.” It is true he also says he tried to market the bond, but he does not say on what basis he offered it, or what terms he was able to get. In these circumstances we are obliged to reach the same conclusion reached by the Board. See Burnet v. Houston, 51 S. Ct. 413, 75 L. Ed.-, decided by the Supreme Court April 13, 1931.

But appellant insists that, even though we reach this conclusion, we should reverse the Board’s decision because of its failure to treat the transaction as an exchange rather than a sale. It would perhaps be sufficient to say as to this that no such question was presented to the Board, except as it was presented after the decision was rendered, but we do not put our rejection on this ground, but rather on the ground that all the evidence of the transaction was consistent with a sale rather than an exchange within the purview of the revenue statutes. The parties themselves regarded it as a sale, for in their written contract they speak of the buyer as wishing to acquire by “purchase,” and the “sellers” as agreeing to deliver to the “buyer” at a certain time, etc., and appellant himself, in his return, recognized that a sale was intended and a profit realized, and the transaction itself, as we think, is only consistent with a sale as that word is ordinarily understood, for there was a present delivery of property for a fixed price in money and its equivalent. The fact that the buyer pays cash in part and promises the balance in the future does not change the legal import of the transaction, or bring it within the terms of section 202 (c). The purpose of the parties unquestionably was to sell the stock for a definite sum of money, of which part was paid in cash and part in promissory notes and a bond secured by a mortgage, but all were promises to pay at a definite date, and the transaction as a whole was only consistent, we think, with the idea of a sale.

As this disposes of the only questions raised by assignments of error in this court, we might perhaps stop here, but counsel in the argument and in the brief urge the applicability of section 212 (b) of the Revenue Act of 1926 (26 USCA § 953 (b), commonly known as the installment sales provision. Hence, unless it be thought we had overlooked the argument advanced in support of this contention, we notice it to call attention to the fact that, though this point was raised in the amended petition filed with the Board in 1927, that is to say, more than five years after the tax accrued, it was obviously not urged on the Board, for not only was it not decided, but in the motion for an amended decision, filed after the original decision, no mention or complaint of the omission was made, and, in the assignments on the appeal to this court, all reference to this issue is again omitted. Since we must necessarily infer, therefore, that the question, though raised on the amended petition before the Board, was not pressed but abandoned, and was not revived in the appeal to this court,, it is too late now to consider it. The rules of this court require that assignments of error intended to be relied upon be specified, and this is a salutary rule which should be adhered to. But, even if we were disposed to disregard it in the present ease, we should be wholly unable to reach a conclusion, since, as we have shown, there is nothing in the findings of fact or in the opinion of the Board which sheds any light upon the subject, and, in the evidence found in the record, there is nothing from which we can determine what proportion of the notes appellant received, and when they were paid, whether he is the sole owner of- the mortgage bond, and, if so, why, or whether, if he was once the sole owner of the bond, he sold it, as his testimony before the Board shows, though his subsequent affidavit denies it, whether limitation on his right to claim the benefit of the section has run, or any other fact material to a fair discussion of this subject.

In these circumstances, we think it our duty to affirm the decision of the Board. Whether appellant may apply to the Board for a rehearing and a decision on his petition to apply the installment statute depends upon facts of which we are not advised, and therefore as to which we express no, opinion.

Affirmed.


text:
    WILBUR, Secretary of the Interior, v. MINI-DOKA IRR. DIST.
    No. 5033.
    Court of Appeals of District of Columbia.
    Argued April 13, 1931.
    Decided May 4, 1931.
    Petition for Rehearing Denied May 13, 1931.
    O. H. Craves and V. H. Wallace, both of Washington, D. C., for appellant.
    F. W. Clements, of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.
   MARTIN, Chief Justice.

An • appeal from a decree overruling a motion to dismiss plaintiff’s bill of complaint for want of equity, and, in the absence of amendment, granting relief to plaintiff as prayed in the bill.

The case arises under the Act of Congress of June 17,1902 (32 Stat. 388), known as the Reclamation Act. The appellant is the Secretary of the Interior. The appellee, plaintiff below, is the Minidoka Irrigation District, a corporation formed under the provisions of the Reclamation Act.

The reclamation act provides generally that the funds obtained from the sale of public lands in certain western states shall be set aside and appropriated as a special fund in the Treasury to be known as the reclamation fund, to be used in the construction and maintenance of irrigation works for the reclamation of arid lands in such states, and that the cost of each project shall be charged against the lands irrigated, and, as rapidly as such charges shall be paid back by the landowners into the reclamation fund, the money shall be used again for the construction of like works. The act authorizes the Secretary of the Interior to perform any and all acts, and make such rules and regulations as may be necessary and proper for the purpose of carrying the provisions of the act into full force ■and effeet. The Secretary is also authorized by the Act of February 21, 1911, known as the Warren Act, 36 Stat. 925 (43 USCA §§ 523-525), to sell excess water from such storage at charges to be fixed by him; and it is provided by the Act of December 5,1924, § 4 subsec. J, 43 Stat. 672, 703 (43 USCA § 526), that all moneys or profits as determined by the Secretary derived from the sale or rental of surplus water under the Warren Act shall be credited to the project or division of project to which the construction has been charged.

The bill of complaint filed below sets out that the Secretary of the Interior under authority of the act planned and constructed an irrigation project on Snake river in Idaho, known as the Minidoka project, consisting of a storage dam with canal systems supplying water to the lands within the project, together with a storage dam and reservoir constructed at Jackson Lake, Wyo.; that the land within the project on the north side of Snake river, comprising 71,000 acres, has been known as the gravity division of the Minidoka project, and now constitutes the Minidoka Irrigation District, while the land on the south side of Snake river, comprising 49,000 acres, has been known as the pumping division of the Minidoka project, and now constitutes the Burley Irrigation District; that the storage dam at Jackson Lake was built at an elevation of 6,752 feet, and the storage capacity thereof, when completed, was approximately 380,000 acre feet, and that the entire cost of its construction, to wit, the sum of $440,424.90, was charged against the two units aforesaid; that afterwards the Secretary of the Interior sold a capacity of 102,-000 acre feet of excess water from the storage dam aforesaid under the Warren Act, supra, and realized therefrom the sum of $429,412.50, whieh has been deposited in the United States Treasury to the credit of the reclamation fund, and also that rentals for exeess water had been collected by the Secretary in the sum of $161,106.65, all of which under subsection J of the Act of December 5, 1924, supra, should have been credited to the two units against whieh the costs of the construction had been charged, namely the plaintiff and the Burley Irrigation District, but that the Secretary had failed and refused to credit the proceeds as aforesaid, and had wrongfully credited 27.7 per cent, thereof to certain so-called “new divisions,” which in fact were not part of the Minidoka project, and had never been charged with any part of the cost of the Jackson Lake dam; that plaintiff appeared before the Secretary and objected to this procedure, but the Secretary had refused to correct the same, wherefore plaintiff prayed for a mandatory injunction requiring the Secretary to credit the entire proceeds aforesaid to the two districts so entitled to them.

In the statement of its ease plaintiff appended to the bill of complaint an exhibit entitled Exhibit G, whereby it appeared that plaintiff and the Burley Irrigation District had theretofore filed a joint protest with the Secretary setting out the same demands as those contained in the bill of complaint, that this was heard by the Secretary upon briefs and oral arguments submitted by their counsel, and that the Secretary had held in part as follows: That in fact as appeared from the records the entire cost of the construction aforesaid had not been charged against the two districts as alleged by plaintiff, but that 27.7 per cent, of such costs had been charged against certain “new divisions” the construction of which as a “north side pumping division” had been contemplated by the Department since the year 1908, and that accordingly 27.7 per cent, of the proceeds realized from the sale and rental of exeess water as aforesaid had been rightfully credited to such “new divisions,” leaving the balance of the proceeds to be credited to plaintiff and the Burley Irrigation District, whieh had been done, and that accordingly the claim of the two districts to be credited with the entire sum so realized had rightfully been denied, and a rehearing afterwards refused.

The motion to dismiss plaintiff’s bill of complaint was directed against the entire bill, including the exhibit attached to it. The bill when thus considered consists of two parts— first, a statement of facts upon whieh the plaintiff relies as a ground for relief; and, second, an exhibit showing that the same statement had theretofore been submitted to the Secretary and by him found to be untrue, and that the Secretary had denied the relief therein sought by plaintiff.

It is clear that the Secretary in the former hearing was acting within his jurisdiction in a quasi judicial capacity, and that the issue presented by the plaintiff in the present bill of complaint was considered and decided by him upon the law and the evidence, that his decision was not arbitrary or capricious, and that the present case is no more than an attempt to appeal from that decision in order to secure a retrial of the same issues of fact and law by a court of equity. Moreover, the remedy which plaintiff seeks is in substance and effect a judgment in mandamus directing the Secretary to act contrary to the facts and law of the case as found by him. Such an appeal will not be entertained by the courts.

In Louisiana v. McAdoo, 234 U. S. 627, 633, 34 S. Ct. 938, 941, 58 L. Ed. 1506, it is said by Mr. Justice Lurton for the court: “There is a class of eases which held that if a public officer be required by law to do a particular thing, not involving the exercise of either judgment or discretion, he may be; required to do that thing upon application of one having a distinct legal interest in the doing of the act. Such an act would be ministerial only. But if the matter in respect to which the aetion of the official is sought is one in whieh the exercise of either judgment or discretion is required, the courts will refuse to substitute their judgment or discretion for that of the official intrusted by law with its execution. Interference in such, a ease would be to interfere with the ordinary functions of government.” See Work v. Rives, 267 U. S. 175, 45 S. Ct. 252, 69 L. Ed. 561, and authorities therein cited.

The motion to dismiss the bill for want of merit should have been sustained by the lower court. The decree is therefore reversed, and the cause is remanded for further proceedings not inconsistent herewith.

VAN ORSDEL, Associate Justice, concurs in the judgment.


author: VAN ORSDEL, Associate Justice.

text:
    UNITED STATES v. DE FRANCIS.
    No. 5032.
    Court of Appeals of District of Columbia.
    Argued March 4, 1931.
    Decided May 4, 1931.
    Leo A. Rover and Rebekah S. Greathouse, both of Washington, D. C., for the United States.
    J. S. Hornback and Roger Moore, both of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.
   VAN ORSDEL, Associate Justice.

This appeal is from an order of the Supreme Court of the District, dismissing the petition of the United States Attorney to cancel the naturalization certificate of the' ap-pellee, Robert De Francis.

It appears that appellee filed his declaration of intention to become a citizen of the United States on July 11, 1922; and he filed a petition for naturalization on November 22, 1926. In this petition he stated, among other things, “I am attached to the principles of the Constitution of the United States.” Attached to the petition were the affidavits of two witnesses to the effect that they had personal knowledge that the petitioner was a person of good moral character, attached to the principles of the Constitution of the United States. These same witnesses appeared before a naturalization examiner and orally testified to the same facts, admitting, however, that they knew that the petitioner had been arrested for violations of the National Prohibition Act (27 USCA), but stated that they did not know the outcome of the arrests. The testimony of these witnesses was repeated under oath in the Supreme Court of the District, at the hearing on the naturalization petition, September 6, 1927. At this time the petitioner also stated under oath that he was attached to the principles of the Constitution of the United States. At the hearing, the naturalization examiner called the attention of the court to the fact that the petitioner had been convicted of violations of the National Prohibition Act. The presiding justice inquired whether there was any proof that petitioner had sold intoxicating liquor, to which the examiner answered in the negative. The certificate of citizenship was thereupon granted.

In the petition for cancellation, the United States Attorney charges that the appellee, for the period of five years preceding the filing of his petition for naturalization, and at the time of naturalization, “was not a person of good moral character, nor attached to the principles of the Constitution of the United States, nor well disposed to the good order and happiness of the United States.” A number of convictions of criminal offenses, involving the manufacture, sale, and possession of intoxicating liquor, in violation of the Prohibition Act, are set forth in the petition, occurring prior to the date of filing his petition for naturalization, and one conviction for a second offense in the Supreme Court of the District of Columbia on January 7,1927, which was prior to the hearing on the petition. In all of these eases it is alleged that appellee pleaded guilty to the offenses as charged.

Section 15 of the Act of (jongress of June 29, 1906, 34 Stat. 601 (8 USCA § 405), provides: “It shall be the duty of the United States district attorneys for the respective districts, upon affidavit showing good cause therefor, to institute proceedings in any court having jurisdiction to naturalize aliens in the judicial district in which the naturalized citizen may reside at the time of bringing the suit, for the purpose of setting aside and canceling the certificate of citizenship on the ground of fraud or on the ground that such certificate of citizenship was illegally procured.”

We think there is no question as to the sufficiency of the grounds set forth in this petition, if established, to justify the cancellation of appellee’s certificate. At the naturalization hearing, the judge asked the question whether there was proof of conviction of the sale of intoxicating liquor. Appellee was the only one present who knew that he had been convicted, and he stbod mute. This, we think, under the circumstances, where appellee was the petitioner seeking the rights of citizenship, amounted to the practicing of a fraud upon the court. In the case of The Kalfarli (C. C. A.) 277 F. 391, 400, it was •said: “If a party conceals a f aet that is material to a transaction, knowing that the other party is acting on the assumption that no such fact exists, the concealment may be as much a fraud as if the existence of the fact were expressly denied, or the reverse of it expressly stated.”

Any person who violates the provisions of the Prohibition Act violates the principles' ■of the Constitution of the United States, and cannot be held to be attached to the principles of the Constitution of the United States. Nor can it be said that such a person possesses good moral character. Evidence showing the lack of good moral character is ground for cancellation of a certificate. United States v. Mirsky (D. C.) 17 F.(2d) 275; Turlej v. United States (C. C. A.) 31 F.(2d) 696, 699; United States v. Leles (D. C.) 236 F. 784; United States v. Raverat (D. C.) 222 F. 1018; United States v. Wexler (D. C.) 8 F.(2d) 880; United States v. Unger (D. C.) 26 F.(2d) 114.

In some of these eases it appeared that all the facts were before the naturalization judge. The equity court, however, proceeded upon the theory that it made no difference whether he had been correctly informed or not; the certificate, if it lacked the prescribed qualification, was illegal. Admission to citizenship under the laws is not a right but a privilege, and, in order for an alien to avail himself of this privilege, he must comply with all the conditions imposed by the statute. Among those conditions is the requirement that he has resided in the United States for five years, “and that during that time he has behaved as a man of good moral character.” This implies that qualification for citizenship imports good moral character in fact, as well as in behavior.

In the Mirsky and Turlej Cases, supra, the naturalization certificates were canceled because of violations of the National Prohibition Act during the five-year period preceding the hearing. In the Turlej Case, the court said: “Eew eases can be found where applicants for citizenship have been admitted, if guilty of violating liquor laws within the five years preceding the hearing, and such cases have been severely criticized by the courts. This was true even before the adoption of the Eighteenth Amendment as a part of our National Constitution. * * * Measured by the authorities, the state court made a mistake in granting appellant citizenship. Appellant did not possess the requisite qualifications, and the court was so advised. However, the court was induced to make such mistake by the frankness of the appellant in admitting his offense, and his avowal, under oath, that he was then attached to the principles of the Constitution. The facts, however, discredit his assertion. He was not qualified for citizenship, but deceived the court into believing that he was. Such deception operated as a fraud upon the court, and this deception and fraud were evidenced by his subsequent, as well as prior, conduct. The trial judge was right in canceling his certificate of naturalization, and his decree should be affirmed.”

In the Mirsky Case, the facts were dosely analogous to those in the present case. It appeared that during the five-year period preceding the issue of his certificate he had deliberately violated the Eighteenth Amendment of the Constitution, and on plea of guilty/was fined for his offense. On this testimony it was held that: “One who deliberately violates the Eighteenth Amendment of the Constitution cannot be said to be attached to the principle declared by that Amendment.” It will be recalled that the appellee in the present case pleaded guilty in each instance where he was charged with violations of the Prohibition Act.

There can be no doubt, therefore, that the petition of the United States Attorney, on its face, malees charges which, if true, would require the cancellation of appellee’s certificate.

The order dismissing the petition is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion.


text:
    BRAMOW v. ROBBIN.
    No. 5028.
    Court of Appeals of District of Columbia.
    Argued March 4, 1931.
    Decided May 4, 1931.
    E. Hilton Jackson, of Washington, D. C., for appellant.
    Leon Robbin, of Washington, D. C., pro se.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.
   VAN ORSDEL, Associate Justice.

This appeal is from an order of the Supreme Court of the District in a bankruptcy proceeding.

It appears that, after the hearings before the referee in bankruptcy, the trastee filed a petition asking that the bankrupt be compelled to turn over to him the sum of $44,622.20, alleged to be fraudulently concealed by the bankrupt or under his control. The bankrupt answered, and the case was tried before the referee, who found that there had been a failure on, the part of the bankrupt to account for $29,000. The referee accordingly ordered that amount to be turned over to the trustee.

A petition for review was filed by the bankrupt in the Supreme Court of .the District, where, after hearing, a motion was filed by the bankrupt for a re-referenee to the referee, or for.a rehearing by the court. Attached to this motion, and appearing for the first time in the ease, was an affidavit of one Frank Birmbaum, showing a payment by the bankrupt to Birmbaum of the sum of $18,000 about four months before the petition in bankruptcy was filed. The motion was denied, and an order entered confirming the turnover order of the referee.' From the denial of the motion, and the order dismissing the petition to review, this appeal was taken. [1, 2] The assignment of errors seeking a review of the testimony before the referee by this court need not be considered further than to announce the rule prevailing- in the federal courts, as stated in Free v. Shapiro (C. C. A.) 5 F.(2d) 578, as follows: “The report of the referee was entitled to great weight because the witnesses, including the bankrupt, testified before him; but it was not conclusive on the District Court. On a petition to superintend and revise, the District Court’s findings of faet are conclusive in this court when there is substantial conflict in the testimony. In such ease we can reverse only for error in the application of law to the facts.”

Coming to the remaining assignments of error to the effect that the court erred in not reopening the ease, we think these assignments can be summarily disposed of. The affidavit of Birmbaum was dated September 10, 1927, which was over a month,before the petition for the turnover order was filed with the referee, and ten months before the turnover order was made, and did not appear in the proceedings .until after the petition for review had been heard in the Supreme Court of the District, when it was attached to the motion for rehearing or re-reference. No offer was made to subpoena or produce Birmbaum if a rehearing were granted, hence we agree with the holding of the court below,' as follows: “No reason is shown why the affidavit of Birmbaum, even if competent evidence, was not produced before the Referee; nor does it appear that Birmbaum will appear if the hearing should be reopened.”

The order, dismissing the petition to review, is affirmed, with costs.


text:
    COCKRELL et al. v. FILLAH.
    No. 5106.
    Court of Appeals of District of Columbia.
    Argued April 15, 1931.
    Decided May 4, 1931.
    Edward C. Kriz and John W. Wood, both of Washington, D. C., for appellants.
    Alfred D. Smith, of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB and GRONER, Associate Justices.
   MARTIN, Chief Justice.

Appeal from orders of the lower court overruling motions to vacate and set aside certain alleged default decrees theretofore entered against appellants.

The appellee, Seade Fillah, as plaintiff below, filed a bill of complaint against appellants, Cockrell and Barnard, alleging that Cockrell had fraudulently and without consideration persuaded her to execute and deliver to him her promissory note for $6,-000 secured by deed of trust upon her real estate; that defendant Barnard had since acquired title to the note as collateral for a debt of $1,000 owing by one George D. Cockrell to Barnard; that Barnard received the note long after it became due, and not as a holder in due course. Plaintiff prayed for an injunction to restrain a sale of her property under the deed of trust, and for a decree requiring Cockrell and Barnard to cancel and deliver up the note and release the deed of trust.

The defendants were regularly served with process. Thereupon Barnard duly filed his separate answer within rule, but Coekrell failed to answer or otherwise plead to the bill. The court, proceeding without notice to either party upon the theory that both parties were in default, then entered a decree pro eonfesso effective against both, and in regular course made the decree permanent.

Cockrell afterwards filed his separate motion praying the court to vacate the decree, and permit him to file an answer. As a ground for the motion he alleged that he was incapacitated by illness at the time when his answer should have been prepared, and was unable to confer with his counsel in order to prepare the same. The court overruled the motion, and Cockrell now appeals from that order. We find no error in this ruling. The reeord fails to disclose the terms of Cockrell’s proposed answer, and moreover such a motion is addressed to the sound discretion of the court, and' the reeord fails to show any abuse of discretion in this case.

Barnard also filed a separate motion praying the court to vacate the decree as to him upon the ground that the court had erroneously assumed that he was in default for answer, whereas in fact he. had regularly filed his answer within due time. The court overruled Barnard’s motion, and this ruling is the basis of Barnard’s present appeal.

We think this was error. In Barnard’s answer he denied the charge of fraud and lack of consideration in the execution and delivery of the note and deed of trust. See Equity Buie 29, Supreme Court D. C., Buies 1926. He .was entitled to his day in court, and to a trial of the issue raised by his answer.

We therefore affirm the order overruling the motion of Cockrell, and reverse the order overruling the motion of Barnard, and this cause is remanded, with directions to the lower court to set aside the decree as against Barnard, and for such further proceedings as are not inconsistent herewith. Costs to be assessed equally between appellants and appellee.

HITZ, Associate Justice, took no part in the consideration or decision of this case.


author: ROBB, Associate Justice.

text:
    McCARL, Comptroller General, et al. v. BROCK.
    No. 5038.
    Court of Appeals of District of Columbia.
    Submitted March 5, 1931.
    Decided May 4, 1931.
    Leo A. Bover, Bebekah S. Greathouse, and H. 0. Hoagland, all of Washington, D. C., for appellants.
    S. T. Ansell and Burr Tracy Ansell, both of Washington, D. C., for appellee.
    Before MABTIN, Chief Justice, and BOBB, VAN OBSDEL, HITZ, and GBO-NEB, Associate Justices.
   ROBB, Associate Justice.

Appeal from -a decree in the Supreme Court of the District enjoining appellants from interfering with and directing the payment to appellee of $906.67, withheld by appellants from appellee’s pay as a naval officer to reimburse the government for alleged overpayments to appellee of dependency allowances.

Three items are involved. $320, allowances paid monthly in 1925-1926 and stopped in 1927. Appellants concede that the decision in McCarl v. Cox, 56 App. D. C. 27, 8 F.(2d) 669, is controlling as to this item; and hence, to that extent, the decree is correct.

As to the $369, appellants contend that, because this item of allowances was paid during the period July 1, 1926, to March 31, 1927, and was stopped monthly over the period from April 1,1927, to June 30,1927 (in other words, during the same fiscal year), there is no pay stoppage. This amount was actually paid appellee monthly by the disbursing officer as allowances, and was thereafter deducted from his pay. It is of no significance that the deduction occurred in the same fiscal year. The decision in the C'ox Case, therefore, is controlling as to this item.

The $226.67 item was paid monthly in 1923. On July 11, 1927, the Navy Department wrote appellee, in part as follows: “The Department considers that you should promptly refund the sum of $226.67, the amount disallowed in the accounts of Lieutenant Jones, Supply Corps, by reason of increased allowances paid to you on the ground whieh you have failed satisfactorily to substantiate and whieh you have since rejected in favor of a totally different ground. You will endorse hereon, with a prompt return of papers, your intentions relative to refunding the above sum of $226.67, for which sum the department considers for the reasons above stated, you are justly indebted to the Government.”

On August 6, 1927, appellee responded, in part as follows:

“My account is now being cheeked $449 by Lieutenant W. Elliott (SC), U. S. N., on account of the General Accounting Offiee in certificate No. K-8452-N dated May 18,1927, * * * and I have not drawn any money since May 31st, excepting subsistence allowance.
“I am willing for eheekage to be made, however, I do not acknowledge’that I was not entitled to the credit.”

Thereupon the Department acted upon the written consent that eheekage should be made, and the account was adjusted accordingly.

It was not until about 29 months later that appellee sought the aid of a court of equity to undo what he had in effect consented should be done. We think he waited too long. .Such injunctive relief as he seeks is awarded to the diligent, and not to those guilty of unreasonable delay. Had appellee desired to withdraw his consent, he should have done so promptly, instead of waiting until after the Department had adjusted his account in accordance with his consent.

It results that the deeree must be modified so as to exclude this item therefrom. As modified, it will be affirmed.

Affirmed, as modified, v


text:
    BURGESS et al. v. WILBUR, Secretary of the Interior, et al.
    No. 5041.
    Court of Appeals of District of Columbia.
    Argued March 5, 1931.
    Decided May 4, 1931.

      Leo A. Rover, U. S. Atty., and John W. Fihelly, Asst. U. S. Atty., both of Washington, D. C., for appellees.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, and HITZ, Associate Justices.
   VAN ORSDEL, Associate Justice.

Appellants filed what they denominated a bill in equity in the Supreme Court of the District of Columbia asking the court to decree certain acts of Congress affecting the Seminole Indians to be unconstitutional and void, and to declare the'legal and equitable rights of the plaintiffs under certain treaties and acts of Congress; to grant a writ of mandamus directed to the defendants compelling them to perform their duties under said laws and treaties as construed by the court; to grant a permanent injunction enjoining the defendants from doing any and all unlawful acts complained of; and to render an accounting. The court sustained a motion to dismiss the bill, from which this appeal was taken.

The relief sought is not such as can be accorded in a proceeding against administrative officers of the government. The power is vested in the defendants to construe the statutes under which they are required to act, and, if their construction be reasonable, it is not within the jurisdiction of the court to interfere with their exercise of discretion. Nor will the court exercise a general veto power on the legislation of Congress, nor pass upon the constitutionality of an act of Congress as a purely abstract question. The rule is clearly stated in Liverpool, N. Y. & P. Steamship Co. v. Emigration Commissioners, 113 U. S. 33, 39, 5 S. Ct. 352, 355, 28 L. Ed. 899, as follows: “If, on the other hand, we should assume the plaintiff’s case to be within the terms of the statute^ we should have to deal with it purely as an hypothesis, and pass' upon the constitutionality of an act of Congress as an abstract question. That is not the mode in which this court is accustomed or willing to consider such questions. It has no jurisdiction to pronounce any statute, either of a state or of the United States, void, because irreconcilable with the constitution, except as it is called upon to adjudge the legal rights of litigants in actual controversies. In the exercise of that jurisdiction, it is bound by two rules, to which it has rigidly adhered: one, never to anticipate a question of constitutional law in advance of the necessity of deciding it; the other, never to formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied. These rules are safe guides to sound judgment. It is the dictate of wisdom to follow them closely and carefully.” '

The bill is likewise defective, in that it seeks a writ of mandamus to compel the defendants to perform their duties under the law as interpreted by the court. Injunction and mandamus cannot be obtained in the same proceeding. Mandamus is exclusively a common-law remedy, and cannot be invoked through an equity court.

The decree of the court sustaining the motion to dismiss is so clearly right that it dispenses with any need of further consideration or discussion.

The decree is affirmed.


text:
    SOMERVILLE et al. v. BRASHEAR et al.
    No. 5000.
    Court of Appeals of District of Columbia.
    Argued Feb. 6, 1931.
    Decided May 4, 1931.
    C. H. Merillat and Wm. McK. Clayton, both of Washington, D. C., for appellants.
    Andrew Wilson and E. C. Dutton, both of Washington, D. C., for appellees.
    Before MARTIN, Chief Justice, and ROBB and VAN ORSDEL, Associate Justices.
   VAN ORSDEL, Associate Justice.

This appeal is from a decree of the Supreme Court of the District of Columbia dismissing an amended bill in equity seeking an accounting.

It appears that one Archibald White died intestate September 19, 1882, leaving a widow, Mary E. White, and seven children. The estate consisted of valuable real estate situated in the city of Washington. The widow, Mary E. White, was appointed ad-ministratrix of her husband’s estate in 1882, and filed her first account in 1884. She was also guardian for a number of her minor children.

The widow died in 1909, leaving a will, and Ida M. White, one of the plaintiffs in this case, was appointed executrix and qualified as such. The estate seems to have been held, both under the administration of the widow and the executrix Ida M. White, within the limits of the family, and no final settlement had been reached as late as April 20, 1926, when the court by decree appointed William MeK. Clayton, Andrew Wilson, and Edwin C. Dutton, as trustees to make a sale of the property described in the original bill of complaint filed in this cause, dated October 20, 1924. The appointment of the trustees was consented to by the attorneys for the plaintiffs.

The trustees sold the property under the direction of the court; and on June 4, 1928, trustees Wilson and Dutton petitioned the court for authority to distribute the proceeds of the sale of the property described in the original bill. The petition for distribution was resisted by plaintiffs, who filed a motion asking that distribution be made to them only. On hearing, the court declined to direct distribution to any of the parties.

Later, upon petition signed and sworn to by attorneys and all the parties, the court found as follows: “That heretofore the dis-tributees and trustees have not been in agreement that a total distribution be made at this time, owing to the fact that in this cause there is involved a question of an accounting between the parties to the eause, but now the distributees' and trustees are in accord and agree that a full distribution of all moneys in the hands of the trustees be fully and completely distributed at this time.” On this finding the trustees were, by order of July 3, 1928, authorized and directed to make full and complete distribution of all the moneys in their hands and file their report thereof, which was accordingly done.

This eause then came on for hearing December 17, 1928, and the court, by decree, found that, as the property described in the bill of complaint had been sold and the proceeds thereof, by consent of all parties interested, distributed by the trustees, the bill could not be sustained for a general accounting between the parties because of laches appearing on the face thereof. On motion of counsel for plaintiffs, leave to amend the bill of complaint for accounting was granted. The present amended bill was filed January 22,1929.

This bill was dismissed by the court on the ground that “the original bill was filed for partition and for an accounting out of the proceeds of the partition. The property involved was sold and its proceeds distributed with the consent of the parties. Leave was later given the plaintiffs to file an amended bill, but the bill filed under this leave is not merely an amended bill but embraces matters more proper for a supplemental bill, or even a; bill of review or to set aside a decree.”

Motion was then made for leave to file a supplemental bill. This motion was denied by the court on the ground that the case was finally terminated when the property was sold and distribution of the proceeds made" by the consent of all the parties. Without stopping to review the case, we are of opinion that the court was right, and that the final sale and distribution of the property by the consent of the parties terminated the case.

The decree is affirmed, with coste.


author: WOOLLEY, Circuit Judge.

text:
    MILLER v. UNITED STATES. HOFFMAN v. SAME.
    Nos. 4583, 4584.
    Circuit Court of Appeals, Third Circuit.
    May 20, 1931.
    Rehearing Denied July 20, 1931.

      P. J. Friel and John Crolly, both of Philadelphia, Pa., for appellants.
    Michael Stoney, Asst. U. S. Atty., and Paul Freeman, Asst. U. S. Atty. in charge, both of Philadelphia, Pa.
    Before WOOLLEY, DAVIS, and THOMPSON, Circuit Judges.
   WOOLLEY, Circuit Judge.

Long before trial Miller filed a written motion in the District Court for a bill of particulars, reciting the substance of two counts of an indictment which charge, in usual form, that he violated the National Prohibition Aet (27 USCA) by possessing and transporting liquor on or about a named date, and divers dates thereafter, at a named place in the district, and averring that because of the “vagueness and indefiniteness of the charge” he was prevented from preparing his defense and would, should occasion arise, be precluded from pleading a former acquittal or conviction. The learned trial judge had before him no more than we now have on this statement. He knew, of course, that the motion was addressed to his discretion, Dunlop v. United States, 165 U. S. 486, 491, 17 S. Ct. 375, 41 L. Ed. 799, and that a motion of this character ordinarily should be granted whenever the accused is liable to be surprised by an issue for which he is not prepared. But the learned trial judge thought the motion vague as to the character of the information desired and found himself unable to determine just what the defendant wanted. So he denied the motion, yet, being careful of the defendant’s rights, he denied it with leave to renew it at a time and under circumstances by which he could be shown that the information in the indictment was less than should have been given. Thus far it is very certain the judge committed no error. And, evidently, so thought the defendant at the moment because he did not ask for an exception; nor would one have been allowed, for this action of the judge was not subject to review. Rosen v. United States, 161 U. S. 29, 35, 16 S. Ct. 434, 40 L. Ed. 606; Dunlop v. United States, supra. Thus the whole matter was left in the defendant’s hands, yet he went to trial and verdict without renewing his motion. As, naturally, the court did nothing more, we cannot see to what order or action of the court the assignment of error is addressed or how, in the circumstances, the court could commit error.

The remaining assignments of error relate to the manner in which the trial court handled the facts of the case, particularly those of the search and arrest. They are briefly as follows:

The Mahony Manufacturing Company operated a brewery at Ashland) or Millers-ville, Pennsylvania. It was suspected that the company was brewing illicit beer and effecting its transportation for sale through the common device of pumping it through a pipe to a nearby place wheré it would be racked off and taken away by trucks. It was suspected that the Hide and fallow Factory, located about one hundred- yards across the road from the brewery, was such a place.

Two members of the Pennsylvania State Constabulary, having been on watch for several days, heard a noise as of the handling of kegs in the Tallow Factory and intercepted a loaded truck as it was being driven from the premises in charge of the defendant Hoffman. The state troopers then entered the factory, found a complete racking room, took samples of beer which on analysis showed 4.6% of alcohol by volume, returned to 'the truck and searched it, finding it loaded with beer, samples of which showed a like alcoholic content. Miller had in the meantime appeared upon the premises giving orders to “dump that stuff,” whereupon the beer was done away with. He also offered a very substantial money inducement to the state troopers to take the truck and drop all charges.

About fifteen minutes after the seizure and arrest, two federal prohibition agents, who had been watching the brewery, appeared and asked if they could be of any help. Hone was accepted or rendered. One of the federal agents took and tested samples of the beer, but that had nothing to do with the search and arrest and does not constitute cooperation with the state officials. The state troopers then arrested Hoffman and, accompanied by the federal agents, took him before a United States Commissioner by whom he was held for trial, and ran the truck with the beer to the government warehouse at Pottsville where they turned it over to the federal agents. Miller was later arrested on a warrant. Subsequently both men were charged with like offenses by separate indictments, were tried together, convicted and sentenced. Both appealed.

The court refused the defendants’ motion, seasonably made, to quash the search and suppress the evidence seized thereunder and at the trial admitted over the defendants’ objection evidence obtained under the search and seizure. These two actions of the trial court the defendants now assign as error on the ground that the search, seizure and arrest, though made by state troopers, were made not for a violation of a state liquor law but for a violation of the federal prohibition law; that the seizure and arrest so made by officers of a state were adopted by the United States as the basis of this prosecution and that they were unlawful because made without a warrant and without probable cause and generally because the case falls under the law of Gambino v. United States, 275 U. S. 310, 48 S. Ct. 137, 52 A. L. R. 1381, 72 L. Ed. 293.

The law of the Gambino Case is briefly as follows:

The Fourth Amendment is not directed to individual misconduct of state officers. Weeks v. United States, 232 U. S. 383, 34 S. Ct. 341, 58 L. Ed. 652. Evidence wrongfully secured by persons other than federal officers is admissible in prosecutions for federal crimes. Burdeau v. McDowell, 256 U. S. 465, 41 S. Ct. 574, 65 L. Ed. 1048, 13 A. L. R. 1159. However, evidence obtained through wrongful search and seizure by state officers who are co-operating with federal officials must be excluded. Flagg v. United States (C. C. A.) 233 F. 481, approved in Silverthorne Lumber Co. v. United States, 251 U. S. 385, 392, 40 S. Ct. 182, 64 L. Ed. 319. The same may be true when an unlawful search and seizure by state officers were made in the presence of a federal official. Byars v. United States, 273 U. S. 28, 47 S. Ct. 248, 71 L. Ed. 520. And it is emphatically true where an unlawful search, seizure and arrest were made solely on behalf of the United States. This last proposition is the crux of nearly every ease of this character.

Applying this law to the facts of the Gambino Case the Supreme Court found that the search and seizure by troopers of the State of Hew York, whose liquor law — the Mullen-Gage Law — had been repealed, were made solely on behalf of the United States; and therefore the conviction, which rested wholly on evidence obtained by the unlawful search and seizure, was, because an invasion of the defendant’s constitutional rights, invalid.

But applying the same law to the facts of the instant ease, contrasted with those of the Gambino Case, we arrive at a different conclusion.

Ho federal official was present when the state troopers seized the truck. .There is no evidence that while federal officers were watching the brewery and state officers were watching the Tallow Factory there was any contact, relation or co-operation between the two forces. Hor is there evidence that when later the state troopers made the search, seizure and arrest there was any co-operation between the two sets of officials. So far as the record shows, each was acting independently of the other all the time. True, the government accepted the benefits of the alleged unlawful search and seizure by accepting the truck and its contents when the troopers delivered them at the government warehouse and by using in evidence the property seized, as it could lawfully do unless the state troopers were acting on its behalf. On this point the state troopers testified that they thought they were enforcing the National Prohibition Law (27 USCA). But this was merely their personal opinion which alone cannot give a federal character to their action, particularly in view of the fact that Pennsylvania has a state liquor law of its-own to be enforced and that the State Constabulary ordered the troopers to this task without any instructions to enforce the federal law. From this evidence we cannot find that the search, seizure and arrest by the state troopers, if unlawful for lack of a warrant and probable cause, were made solely on behalf of the United States or in co-operation with officials of the United States within the meaning of the Gambino decision.

The defendants next charge error to the court in overruling their objections to testimony concerning the commission of offenses at any place other than Millersburg, Pennsylvania. This assignment arises out of an admitted mistake in the Miller indictment which is serious or of no consequence according to the law. /

The Hoffman indictment charges that the offenses were committed at Germansville Rd. S. of the Mahony Manufacturing Company at South Ashland in the Eastern District of Pennsylvania. According to the evidence that is where everything happened. The Miller indictment contains three counts. The first (withdrawn at the trial) charges that several persons conspired to run' a beer pipe line “from a brewery known as the Mahony Manufacturing Company in Ashland, Pennsylvania, to a hotel building known as the Fountain Springs Hotel, Millersburg, Pennsylvania,” in the Eastern District of Pennsylvania, and avers several overt acts, one at Ashland, others at Fountain Springs Hotel, Millersburg. The second and third counts Charge commission of the offenses at Millers-burg, Pennsylvania, in the Eastern District, of Pennsylvania. Now there is no Millers-burg in that district. There is, however, an unincorporated village or community lying on the outskirts of Ashland known locally,as Millersville in which is situated the Fountain Springs Hotel before referred to. Ashland is in the Eastern District of Pennsylvania.

The learned trial judge, regarding the venue as stated in the proper district and because the name “Millersburg” .was laid after a videlicet, denied the defendants’ motion. We think he was right under the law (Rev. St. § 1025, 18 USCA § 556) which provides that:

“No indictment found and presented by a grand jury in any district * * * court of the United States shall be deemed insufficient, nor shall the trial, judgment, or other proceeding thereon be affected by reason of any defect or imperfection in matter of form only, which shall not tend to the prejudice of the defendant.”

This is a provision of long standing and its meaning is well understood. It has never been construed as permitting the omission of any matter of substance from an indictment but is applicable where the only defect complained of is that some element of the offense is stated loosely and without technical accuracy. Dunbar v. United States, 156 U. S. 185, 15 S. Ct. 325, 39 L. Ed. 390. The test is whether the indictment contains every element of the offense intended to be charged and sufficiently apprises the accused of what he will be required to meet, and, in case other proceedings are taken against him, whether the record shows with accuracy to what extent he may plead a former acquittal or conviction. Horn v. United States (C. C. A.) 182 F. 721; Id., 219 U. S. 585, 31 S. Ct. 470, 55 L. Ed. 347. A mistake in expressing the substance of a crime, if sufficiently stated and its meaning is understood, will be looked upon as a formal defect. United States v. Jackson (C. C.) 2 F. 502. And, so, if an essential averment be faulty in form yet may by fair construction be found within the text of the indictment it is sufficient, United States v. Howard (D. C.) 132 F. 325, for then, manifestly, no wrong can be inflicted upon the defendant.

We are of opinion that the mistake in twice using the word “Millersburg” did not, in view of the rest of the indictment, mislead or mis-inform the defendant of the place at which the offenses were laid. Nor would it, in view of the rest of the indictment, preclude him from later pleading a former acquittal or conviction.

The defendants’ assignment that the court erred in refusing their motion for binding instructions js without substance.

The judgments are affirmed.


author: BRYAN, Circuit Judge. SIBLEY, Circuit Judge HUTCHESON, Circuit Judge

text:
    GRIMSLEY v. UNITED STATES (two cases).
    Nos. 6133, 6142.
    Circuit Court of Appeals, Fifth Circuit.
    June 6, 1931.
    SIBLEY, C. J., dissenting.
    Philip D. Beall and J. McHenry Jones, both of Pensacola, Fla., for appellants.
    Fred Cubberly, U. S. Atty., and Geo. Earl Hoffman, Asst. U. S. Atty., both of Pensacola, Fla., for the United States.
    Before BRYAN, SIBLEY, and HUTCH-ESON, Circuit Judges.
   BRYAN, Circuit Judge.

J. Clifford Grimsley, appellant in No. 6133, was convicted upon an indictment which charged that on June 25, 1929, in the Northern District of Florida, he, “then and there unlawfully and feloniously, did sell a certain motor vehicle, to-wit, Ford Sedan, Motor No. A-669267, then and there well knowing the same to have been transported in interstate commerce, that is to say from Mobile, in the State of Alabama, to Pensacola in the State of Florida, and then and there well knowing the same to have theretofore been stolen.” George Grimsley, appellant in No. 6143, was convicted upon an indictment, identical in form with that against Clifford Grimsley, which alleged the sale of another automobile at a later date. Each indictment was demurred to on the ground that it failed to allege any offense against the laws of the United States, and on the further ground that it failed to allege directly that the motor vehicle, which the appellant proceeded against was charged with selling, had been stolen. The demurrers were overruled, and the orders thereon are assigned as errors.

The indictments were drawn under the National Motor Vehicle Theft Act, 18 USCA § 408. That act provides for the punishment, by section 3, of one who transports in interstate or foreign commerce a motor vehicle, knowing the same to have been stolen; and, by section 4, of one who receives, conceals, stores, barters, sells or disposes of a motor vehicle, “moving as, or which is a part of, or which constitutes interstate or foreign commerce, knowing the same to have been stolen.” 41 Stat. 334. It is an essential element of the offense under the fourth section that the accused receive the motor vehicle while it is moving as, or is a part of, or constitutes, interstate or foreign commerce. The act, as is apparent on the face of it, is based upon the commerce clause of the Constitution, and does not assume to punish one who receives or sells a stolen motor vehicle after it has ceased to move in, or be a part of, interstate or foreign commerce. Brooks v. United States, 267 U. S. 432, 45 S. Ct. 345, 69 L. Ed. 699, 37. A. L. R. 1407. This essential element was not alleged in the indictments under consideration.

It is true that eaeh appellant was charged with knowledge that the automobile which it was alleged he received and sold had been- previously transported in interstate commerce; but for all that appears in either indictment, such transportation had come to an end and the automobile had come to rest in Florida long before the accused received or sold it. The indictments, under the most liberal interpretation, charged only the ordinary offense against the state law of receiving stolen goods with knowledge that they had been stolen; they failed to charge directly, or even by implication, an offense within the jurisdiction of the federal District Court. An indictment is fatally defective which omits an essential element of the offense sought to be charged. Evans v. United States, 153 U. S. 584, 14 S. Ct. 934, 38 L. Ed. 830. The right of an accused to be informed of the nature and cause of the accusation against him is a substantial right, the enjoyment of which is assured by the Sixth Amendment. It is not a mere technical or formal right, within the meaning of 18 USCA § 556 or 28 USCA § 391. United States v. Cruikshank, 92 U. S. 542, 23 L. Ed. 588; United States v. Hess, 124 U. S. 483, 8 S. Ct. 571, 31 L. Ed. 516. We are therefore of opinion that it was reversible error not to sustain the demurrers on the ground that the indictments failed to charge an offense against the laws of the United States. This conclusion makes it unnecessary to consider the second ground of demurrer, to the effect that the indictments failed to allege directly and positively that the automobiles, which the accused were charged with selling, had been stolen; for from what has been already said, it follows that in our opinion new indictments will have to be found before appellants can be further prosecuted. The present indictments having been found within the statutory period of limitations, new indictments would not be barred, even after the expiration of that period. 18 USCA § 582, as amended in 1927.

In view of the situation, we deem it proper to suggest that the new indictments, if they shall be found, ought to allege directly that the motor vehicles had been stolen. The whole objeet of the act of Congress is to punish the transportation or receipt in interstate or foreign commerce of motor vehicles that have been stolen. Brooks v. United States, supra. Theft of a motor vehicle is therefore an essential element of the crime. It is not always true that a statutory crime may be alleged in an indictment in the language of the statute. United States v. Hess, supra. For a form of indictment which well alleges the common offense of receiving stolen goods with knowledge that they had been stolen, see Bishop’s Directions & Forms, § 916. It is so easy for the pleader to follow this or some other approved form in alleging the receipt or sale of stolen goods with knowledge that they had been stolen, that eourts ought not to have to resort to inferences and to statutes relating to harmless error, in an effort to bolster up an indictment for that offense.

The judgments are, and each of them is, reversed; and the causes are remanded for further proceedings not inconsistent with this opinion.

SIBLEY, Circuit Judge

(dissenting).

My dissent rests upon the Act of February 26, 1919, 28 USCA § 391, providing: “On the hearing of any appeal * * * in any ease, civil or criminal, the court shall give judgment after an examination of the entire record before the court, without regard to technical errors, defects, or exceptions which do not affect the substantial rights of the parties.” This means that no new trial is to be. granted for an abstract error which the whole record shows did no practical harm. The same words were used in this same meaning by the court in Iron-Silver Co. v. Mike & Starr Co., 143 U. S., at page 402, 12 S. Ct. 543, 36 L. Ed. 201. This is a highly remedial •statute touching a valid complaint against the administration of justice, and ought to be fully effectuated. As applied to a ruling on a demurrer to an indictment which is followed by a trial, it is not to be confused with the old law in 18 USCA § 556, that: “No indictment * * * shall be deemed insufficient * * * by reason of any defect or imperfection in matter of form only, which shall not tend to the prejudice of the defendant.” This law applies to the trial judge, and is still unchanged. It covers only defects of form, and declares that disregard of such defects as are mentioned in it is not error. The new law speaks not to the trial judge, but to the reviewing court, and, assuming that the. trial jud^e has committed error, it directs the reviewing court not to punish it by a new trial if it turns out in the light of the whole record to be an abstract error, and without practical prejudice to the defendant. The decisions under the old law as to what it takes to make a good indictment, and what is matter of form and what of substance, are still binding on the trial judge in his rulings on demurrer, but have little to do with the new law in its application by a reviewing court. The new law was passed for the purpose of working a change there. I agree that the indictment here concerned was bad in matter of substance, and that it was error to overrule the general demurrer, but I think it clear that the error is an abstract or technical one, and did the defendant no harm. There are two troubles with the indictment. First, it alleges that the defendant well knew that the car was stolen when he received and sold it, without alleging directly that it was in fact stolen. The statute itself has the same fault, but no one doubts that it applies only to a ear really stolen. Legislation may proceed by implication, but good pleading cannot. Nevertheless, an allegation that one knew a thing to be stolen has been held on appeal equal to alleging that it was stolen, and he knew it. Grandi v. United States (C. C. A.) 262 F. 123; Wendell v. United States (C. C. A.) 34 F.(2d) 92; Melanson v. United States (C. C. A.) 256 F. 783. Second, the indictment alleged merely that the defendant well knew that the ear had been transported in interstate commerce. On the same authorities we may take this as sufficiently implying that the ear had been so transported. But the majority opinion points out that for all the indictment says, the transportation might have happened long before the defendant received and sold it, and that it is not, therefore, alleged that the car was then a part of interstate commerce. This is undoubtedly a substantial defect, but one that never occurred to the defendant or his counsel, and was never specially presented to the court below, but was discovered by this court in its consultation, and the whole record plainly shows that it is purely abstract, because the ease in fact involved no ancient, but a very recent, transportation. In appellant’s brief the only specification of error touching the demurrer is this: “1. The court erred in overruling and denying appellant’s demurrer to count three of the indictment because such count did not aver directly that the car in question was a stolen car.” No other point was argued by brief or orally, and none other was apparently presented in the trial court. If the judge had really ruled that it was not necessary that the car be in fact stolen, or that when received and sold it be still a part of interstate commerce, and if in his rulings on evidence and in his instructions he had governed himself accordingly, the error would have had practical consequences; but no such thing occurred here. Appellant’s counsel in his brief says: “There is no doubt but that the ear in question was stolen, (a), by someone; (b), at Mobile, Alabama; (c), on June 23, 1929; (d), between 7:39 and 9:30 P. M.; (e), and was sold in Pensacola-by appellant on June 25th, 1929.” The record shows that there was never any contention to the contrary. The sole defense was that defendant did not know it was stolen. The case was tried exactly like it would have been if the indictment had been letter-perfect, and just like it will be when a new indictment is gotten. There is no contention that the defendant was not in fact fully informed of the nature of the charge against him (see Segurola v. U. S., 275 U. S., at page 110, 48 S. Ct. 77, 72 L. Ed. 186), or that he is not by this record sufficiently protected from another prosecution for this same offense. That this court, as the result of its own astuteness, should grant a new trial on a point which, although latent in the general demurrer, was not really raised below, and not complained of here, and which had no bearing whatever on the real case, seems to me highly technical and forbidden by the statute. Horning v. District of Columbia, 254 U. S. 135, 41 S. Ct. 53, 65 L. Ed. 185; Segurola v. United States (C. C. A.) 16 F.(2d) 563, affirmed 275 U. S. 106, 48 S. Ct. 77, 72 L. Ed. 186.

HUTCHESON, Circuit Judge

(concurring).

The opinion of the majority is an extremely simple and, as I think, correct statement of the principle that two substantial things must concur before a defendant may be convicted of a felony in a court of the United States; (1) He must be charged by indictment with the commission of a federal offense;. (2) the offense must be proven against him.

I have always supposed that as an indictment without proof cannot support a conviction, so proof without indictment cannot.

That Congress by the Act of February 26, 1919, 28 USCA § 391, either intended or has effected the result that in federal courts proof of a federal offense is now the only matter of substance, that indictment is mere technicality, and may, when proof is ample, be entirely dispensed with, I do not believe.

No ease has yet been found by me which declares that failure to charge the essential element of an offense is a mere technicality; on the contrary, there is general concurrence in the statement that if “the indictment fails to state facts sufficient to constitute the crime charged, the judgment of conviction cannot, of course, be sustained” Sonnenberg v. U. S. (C. C. A.) 264 F. 327, 328; Wong Tai v. U. S., 273 U. S. 80, 47 S. Ct. 300, 71 L. Ed. 545; Wishart v. U. S. (C. C. A.) 29 F.(2d) 103, 106; Shilter v. U. S. (C. C. A.) 257 F. 724, and this even in the absence of an attack of any kind upon the indictment in the court below. Sonnenberg v. U. S. (C. C. A.) 264 F. 327, 328.

Where the indictment has been challenged by demurrer, raising not technicality, but matters of substance, and the demurrer has been erroneously overruled, by that much more is it clear that a conviction upon such indictment must be reversed. Moore v. United States, 160 U. S. 268, 16 S. Ct. 294, 40 L. Ed. 422.

Technicality and substance are not so confused in my mind as that I can bring myself to believe that failure to charge the substantive elements of a federal offense constitutes “technical error, defect, or exception which does not, affect the substantial rights” of the defendant.

I concur in the majority opinion.