author: AUGUSTUS N. HAND, Circuit Judge. PER CURIAM.

text:
    STURGES v. CLARK D. PEASE, Inc., et al.
    No. 275.
    Circuit Court of Appeals, Second Circuit.
    March 9, 1931.
    On Rehearing, April 24, 1931.
    Alexander C. Dick, of New York City (Hinckley, Allen, Tillinghast, Phillips & Wheeler, of Providence, R. I., of counsel), for appellant.
    Falk & Orleans, of New York City (Samuel Falk, of New York City, of counsel), for appellee Clarke D. Pease, Inc.

      Robert E. Hanley, Acting U. S. Atty., of New York City (Harry G. Herman, Asst. U. S. Atty., of New York City, of counsel), for appellee Elting.
    Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
   AUGUSTUS N. HAND, Circuit Judge.

This appeal raises tbe sufficiency of tbe amended bill of complaint. The amended bill alleges that the complainant purchased a secondhand Hispano-Suiza automobile in Paris, France, for 80,000 francs and'attempted to import it into the United States; that if arrived on the steamship Lafayette at New York on May 26,1930, and bore on it in various places the trade-mark “H-S,” owned and registered by the defendant Clarke D. Pease, Inc., a New York corporation; and that a copy of the registration had been filed with the Custom Authorities in New York pursuant to section 141, chapter 3, title 19, of the United States Code (19 USCA § 141)..

Complainant after the arrival of the car at New York made an appraisement entry in the office of the defendant Elting, as collector of the port, and demanded that the ear be appraised, the duty fixed, and after payment thereof possession be given to her. This demand was refused by the collector on the ground that under sections 141,142, and 143 of chapter 3, title 19, of the United States Code (19 USCA §§ 141-143), it was unlawful to import the automobile without written consent of Clarke D. Pease, Inc., because the latter .had registered and filed the trade-mark which the car bore. The complainant thereupon requested from Clarke D. Pease, Inc., its written consent to the importation of the automobile for her personal use, and not for resale, but such permission was refused.

Upon the foregoing state of facts the complainant sought a decree directing the collector to deliver the ear to her upon payment of lawful duties and enjoining Clarke D. Pease, Inc., from requiring the collector to detain the car by reason of the trade-mark or from in other ways interfering with her use of it.

Two causes of action are set up in the amended bill. The first is based upon the contention that the statute relating to the importation of merchandise of foreign manufacture bearing a trade-mark owned by a citizen of the United States is inapplicable to articles intended only for the personal use of the importer; the second upon the contention that, if the statute in terms covers such articles, it is unconstitutional. The court below dismissed the entire bill, and from its decree this appeal has been taken.

The statutory provisions which affect the ease are contained in title 4 of the Tariff Act of September 21, 1922, and are the following :

“Section 401. When used in this title— • • «
“(e) Merchandise. — The word 'merchandise’ means goods, wares, and chattels of every description and includes merchandise the importation of which is prohibited. * * * ” 19 USCA § 231.
“See. 526. (a) That it shall be unlawful to import into the United States any merchandise of foreign manufacture if such merchandise, or the label, sign, print, package, wrapper, or receptacle, bears a trade-mark owned by a citizen of, or by a corporation or association created or organized within, the United States, and registered in the Patent Office by a person domiciled in the United States, under the provisions of the Act entitled 'An Act to authorize the registration of trade-marks used in commerce with foreign nations or among the several States or with Indian tribes, and to protect the same,’ approved February 20, 1905, as amended, if a copy of the certificate of registration of such trade-mark is filled with the Secretary of the Treasury, in the manner-provided in section 27 of such Act, and unless written consent of the owner of such trade-mark is produced at the time of making entry.
“(b) Any such merchandise imported into the United States in violation of the provisions of this section shall be subject to seizure and forfeiture for violation of the customs laws.
“(e) Any person dealing in any such merchandise may be enjoined from dealing therein within the United States or may be required to export or destroy such merchandise or to remove or obliterate such trade-mark and shall be liable for the same damages and profits provided for wrongful use of a trademark, under the provisions of such Act of February 20, 1905, as amended.” 19 USCA §§ 141-143.

The main ground on which the appellant rests her contention that these statutory provisions are not applicable to her ease is that the Hispano-Suiza automobile which she seeks to import is not “merchandise” within the meaning of sections 141,142, and 143 of chapter 3, title 19, of the United States Code (19 USCA §§ 141-143). Her counsel begins his argument by saying that the statutory definition of “merchandise” found in section 231 of chapter 3, title 19, of the Code (19 USCA § 231), is limited to subtitle 4 thereof, and does not define the word when used in sections 141, 142, and 143, which are contained in the prior subtitle 3 governing merchandise of foreign manufacture bearing a trade-mark owned by a citizen or a corporation organized within the United States. This particular argument was induced by the words in section 231 of the Code which limit the definition far the use of the word “merchandise” in that particular subtitle. But as appears from the quotation from section 401 of title 4 of the Tariff Act of September 21,1922 (19 USCA § 231), the definition of “merchandise” relates to the use of the word wherever found in that title and thus distinctly defines its meaning in section 526 (a) (b) and (e) of the Tariff Act .(19 USCA §§ 141-143).

While the act codifying the laws of the United States provides that the Code shall establish “prima facie” the laws of the United States it adds that, “in ease of any inconsistency arising through omission or otherwise between the provisions of any section of this Code and the corresponding portion of legislation heretofore enacted effect shall be given for all purposes whatsoever to such enactments.” 44 U. S. Stat. Pt. 1, p. 1.

We are therefore confronted at the outset with the provisions of title 4, § 401, of the Tariff Act (19 USCA § 231), which define “merchandise” in the most sweeping terms and state that the word “‘means goods, wares .and chattels of every description and includes merchandise the importation of which is prohibited.” It requires much subtraction from the natural meaning of words to eliminate appellant’s ear bearing the foreign trade-mark owned by a New York corporation from the term “merchandise” as defined in the Tariff Act.

But it is contended that the word “merchandise” naturally means goods imported for sale and that the statute was directed at goods intended for ssile and not at property brought in for personal use and consumption. In this connection it is argued that the drastic statutory provisions in question were only adopted to avoid our decision in A. Bourjois & Co. v. Katzel, 275 F. 539, where we held that the importation and sale in the United States of an article made in a foreign country bearing a foreign trade-mark also owned in this country did not infringe the rights of the owner of the trade-mark in this country. That decision doubtless brought about the legislation by Congress, and, if the reversal of the decision by the Supreme Court in Bourjois v. Katzel, 260 U. S. 689,43 S. Ct. 244, 67 L. Ed. 464, 26 A. L. R. 567, had occurred pri- or to the date of the Tariff Act the provisions in question would not have been enacted at all. Coty, Inc., v. Le Blume Import Co. (D. C. ) 292 F. 264, at page 269. But this fact does not settle the scope of the aet.

It is of course true that the appellant had a perfect right to buy and import the automobile in question provided the trade-mark was removed; in other words, the statute does not prevent importation of the car itself but only importation of the ear when bearing the foreign trade-mark. The object of- this drastic statute is to protect the owner of a foreign trade-mark from competition in respect to goods bearing the mark. If such goods can be imported for personal use without his consent, they will be introduced into the country with the risk of ultimate sale. By such a system an opportunity would likewise be afforded for evasive importations when the real object was sale. But, even though importation, as in this ease, be for personal use, it is likely that any automobile thus imported will finally be turned in as part payment toward the purchase price of a new car or otherwise. Sales of cars bearing the foreign trade-mark and imported without the consent of Clarke D. Pease, Inc., interfere with its right to control the use of the mark in this country which was the apparent purpose of the congressional legislation.

A mark betokening the origin of a car is an important element in its value, and the American owner of the mark is entitled to have the benefit of such sales as are affected by it. Buyers are likely to purchase Hispano-Suiza. ears from Clarke D. Pease, Inc., in order to secure the mark if they cannot otherwise obtain that advantage. If they are allowed to import for personal use without its .consent, Clarke D. Pease, Inc., may certainly lose customers who would be willing to buy from them rather than possess cars bearing no trade-mark. To obtain such advantages the local owner of the foreign mark is given control of the importation of all cars bearing it.

The term “merchandise” has'been used to cover clothing and other goods imported for personal use, United States v. Chesbrough (D. C.) 176 F. 778; likewise to include opium and intoxicating liquors the sale of which is forbidden, United States v. Sischo, 262 U. S. 165, 43 S. Ct. 511, 67 L. Ed. 925; United States v. 1,250 Cases of Intoxicating Liquors (C. C. A.) 292 F. 486. In tax cases a yacht used as a pleasure boat, Tobey v. Kip, 214 Mass. 477, 101 N. E. 998, and household furniture, Sullivan v. Inhabitants of Ashfield, 227 Mass. 24, 116 N. E. 565, have been held to come within the term “merchandise” in tax statutes. But decisions construing the meaning of the word “merchandise” are hardly important where the statutory definition is so all-inclusive as the one here.

In view of the foregoing we hold that the appellant’s ear is “merchandise” within the meaning of the statute.

The contention that the statute if interpreted as above would be unconstitutional is without merit. It has been repeatedly held that Congress may regulate the type of merchandise which is brought into this country and that merchandise legally purchased and .used elsewhere may be prohibited -from entry and use here. Buttfield v. Stranahan, 192 U. S. 493, 24 S. Ct. 349, 48 L. Ed. 525; The Abby Dodge v. U. S., 223 U. S. 166, 32 S. Ct. 310, 56 L. Ed. 390; Cunard S. S. Co. v. Mellon, 262 U. S. 100, 43 S. Ct. 504, 67 L. Ed. 894, 27 A. L. R. 1306. The question is really one of legislative policy. By the Tariff Act Congress adopted the policy of protecting the American owners of foreign trade-marks by most drastic means. However much we may differ with its policy, the wisdom of the legislation is for the lawmaking body, and we cannot say that the means adopted were unadapted to the end sought to be attained.

The decree is affirmed.

Upon Petition, for Rehearing.

PER CURIAM.

We affirmed the decision of the District Court dismissing the bill of complaint and holding that complainant’s Hispano-Suiza automobile could not be imported for the reason that it bore a foreign trade-mark owned by Clarke D. Pease, Inc., a citizen of the United States, and the written consent of the latter to importation had not been obtained as required by section 526 (a) of title 4 of the Tariff Act of September 21, 1922 (19 USCA § 141). .

After our decision, the complainant applied to the collector of the port for permission to remove or obliterate the trade-marks on the merchandise in order thus to obviate the objections to the -importation. In making this application, she relied upon section 526 (e), 19 USCA § 143, which provides that the importer may be enjoined from dealing in the merchandise “within the United States or may be required to export or destroy such merchandise or to remove or obliterate such trade-mark. * * * ” The collector took the position that the Secretary of the Treasury had ruled that the provisions of section 526 (c) are to be enforced only by a court and are not administrative provisions to be applied by the Secretary of the Treasury, and that the request for permission to remove or obliterate the trade-marks “should have been made to the court.” After this 'ruling the complainant moved for a rehearing of this appeal so that a mandate might issue directing that upon the removal of the trade-marks and the payment of all proper duties and charges, entry of the automobile might be permitted.

On the argument of the appeal, and in complainant’s brief, it was not suggested that she desired to have the trade-marks removed or obliterated so that she might be allowed to retain her car. Nor does the bill of complaint ask to have the trade-marks removed or obliterated. The only cause of action of any moment, which is the first, is based upon the claim that the provisions of section 526 of the Tariff Act (19 USCA §§ 141-143), are inapplicable to an automobile which is being imported for the personal use of the owner and not for sale. Complainant does, however, pray in her bill that the collector be ordered to admit the-car to entry and to deliver it to her upon payment of customs duties and other lawful charges, and also asks for “such other and further relief as the court may deem proper.” This we think is enough as a matter of pleading to justify us in allowing the bill to stand and the cause to go to trial if, under section 526 (c), supra, the complainant has any right to require the car to be admitted to entry on removal or obliteration of the trade-marks.

In answer to complainant’s petition for a rehearing, Clarke D. Pease, Inc., says that under section 526 (b), 19 USCA § 142, the ear is “subject to seizure and forfeiture for violation of the customs laws,” and that it has already been seized by the collector. Clarke D. Pease, Inc., likewise says that the provisions of section 526 (e), 19 USCA § 143, only afford supplementary remedies for the benefit of the trade-mark owner and not of the importer, that the trade-mark is impressed upon so many parts of the automobile that it is impracticable to obliterate it, and that when, as is the case here, the collector has expressed “a willingness to permit the exportation of the car back to the port it came from the importer is being granted every consideration.”

We have no doubt that the car must be regarded as “merchandise imported into the United States” within the meaning of section 526 (b) of the Tariff Act (19 USCA § 142), and that it was such when it arrived within the limits of the port of New York. American Sugar Ref. Co., v. United States, 181 U. S. 619, 21 S. Ct. 830, 45 L. Ed. 1024; Marriott v. Brune, 9 How. 619, 13 L. Ed. 282; United States v. Southmayd, 9 How. page 637, 13 L. Ed. 290. By such importation it became, under section 526 (b), “subject to seizure and forfeiture.” But the statute affords certain alternative remedies when no forfeiture is decreed. While the collector may file a libel for forfeiture, yet, where he does not take this drastic step which nothing that has been suggested to us would seem to justify, either an injunction or an order to export or to destroy the car, or to remove the trade-marks therefrom may be granted under section 526 (c), 19 USCA § 143. Both the ruling of the Treasury Department and the fact that the last three remedies follow the' clause of section 526 (e) providing for injunctive relief would indicate that the remedies are not administrative, but are intended to be enforced by a court, and that the selection of the appropriate remedy will depend upon the exercise of judicial discretion.

Though the merchandise which has been unlawfully imported is subject to seizure and forfeiture under section 526 (b), 19 USCA § 142, and has been actually seized by the customs authorities, we think that the collector may be required to assert his right to file a libel for forfeiture with promptitude. Any other mode of procedure would render the remedies afforded by section 526 (c), 19 USCA § 143 futile and incapable of efficient enforcement. The situation is analogous to those where claims for taxes have existed against bankrupt estates but no steps have been taken to assert them. In such cases we have required the government to file its claim within á specified period, and, in the event of failure to do this, have ordered the estate administered free from such claim. In re Anderson (C. C. A.) 279 F. 525.

It cannot be said that the complainant has no right to have her ear admitted to entry upon removal or obliteration of the trademarks, because this remedy can only be invoked by the owner of the trade-mark. While we do not say that the latter may not invoke it, we do not think this remedy is solely or even primarily for the benefit of such owner. The owner of the trade-mark is amply protected by the clauses of section 526 (c) permitting an injunction against dealing in the prohibited merchandise and providing for exportation and destruction. The clause permitting the merchandise to remain after removal of the trade-mark really benefits the* importer alone, and evidently was inserted in the act to ameliorate the situation of the latter when the facts justified its application. It is quite superfluous and useless if the importer can never be heard to say that it ought to be applied. We think complainant should be allowed to invoke the remedy sought, provided that the collector does not insist upon a forfeiture.

The collector makes substantially the same contentions as Clarke D. Pease, Ine., but adds that he objects to the burden of seeing that the trade-marks are removed or obliterated. Perhaps he ought not to be under such a burden, but that will depend on the extent of the burden in this particular case and whether removal or obliteration is shown to be reasonable and practicable in the circumstances. Whether the remedy sought should he applied or not is a matter for a court to determine upon proofs, and the trial court is the proper tribunal to conduct the inquiry.

Although this appeal was not argued upon the theory that the appellant was seeking the remedy she now invokes, we think under the prayer for general relief contained in her bill that she should be given the opportunity to pursue the remedy in the District Court.

A mandate will issue reversing the decree, remanding the ease, and providing (1) that the collector shall have thirty days within which to file a libel of forfeiture, and that, if he files such libel, the cause shall stand over to await the outcome; and (2) likewise providing that, in case no libel is filed within the foregoing period, the court shall hear proof and determine whether complainant’s ear shall be exported or destroyed, or, after removal or obliteration of the trade-marks thereon and the payments of customs duties and other proper charges, shall be admitted to entry.


source: Caselaw Access Project

author: CHASE, Circuit Judge.

license: Public Domain

text:
    SUBHI MUSTAFA SADI v. UNITED STATES.
    No. 239.
    Circuit Court of Appeals, Second Circuit.
    March 16, 1931.
    Rehearing Denied April 20, 1931.
    Frank J. McEwen, of New York City, for appellant.
    Robert E. Manley, Acting U. S. Atty., of New York City (Frank W. Ford, Asst. U. S. Atty., of New York City, of counsel), for the United States.
    _ Before L. HAND, CHASE, and MACK, Circuit Judges.
   CHASE, Circuit Judge.

This appears to be a case of unusual hardship, but the statute above quoted explicitly forecloses any right of the appellant to be admitted to citizenship on his pending petition. We do not now undertake to determine whether or not he was entitled to entry for permanent residence at the time he was admitted at Boston. The fact remains that he was not so admitted, and, while that record stands, he cannot comply with the statute requiring his lawful entry for permanent residence to be established. See In re Wieg (D. C.) 30 F.(2d) 418.

It is urged that the order sustaining the writ of habeas corpus fixed his status as that of an alien admitted for permanent residence. To the extenj; that it had the effect of preventing his deportation upon the warrant which had then been-issued, it did, of course, lend some color of permanence to his stay, in that, he successfully withstood that attempt to deport him, but it did not change in any respect the terms and conditions of his original entry. It simply gave effect to the right he then possessed to remain in this country notwithstanding the order of deportation which had been issued. In respect to his ability to lay an essential foundation for his admission to citizenship, he stands in exactly the same situation he would have been had no warrant for his deportation been issued and no writ of habeas corpus sustained in his behalf. So far as the record shows, the writ was sustained on the ground that this appellant was quota exempt. Proof of residence that may, perhaps, become permanent because this alien was not deportable under a warrant that was issued and may not be deportable at any future time, dependent wholly upon what the future may bring forth, is certainly not the same as proof of his lawful eutry for permanent residence. Of course, the order sustaining the writ of habeas corpus neither necessarily involved the determination that he had lawfully entered for permanent residence, nor does it appear that it was based on any such ground.

Order affirmed.

On Petition for Rehearing.

The petitioner is mistaken in the belief that we held the certificate of admission invalid. Whether it is valid or not, his proof of an essential fact is short. It did not show that he was admitted for permanent residence, and, with the records at Boston as they now stand he cannot prove that he was. That makes it impossible for him to prove what was necessary even before the Act of March 2, 1929 (45 Stat. 1512) took effect, In re Wieg (D. C.) 30 F. (2d) 418, and so we held that he could not be admitted to citizenship on his pending petition, since he could not show that he had in fact been admitted for permanent residence as the statute requires.

Nor can the petitioner take anything from the Act of June 7, 1924 (8 USCA § 228). Subdivision (1) relates wholly to aliens who were not only admitted before June 7, 1924, but were admitted in excess of quota and charged to the quota of a later month; while subdivision (2) applies to aliens admitted before June 7, 1924, under a construction of the Act of May 19, 1921 (42 Stat. 5), required by court decision. But, so far as has been made to appear, his admission as a student for a period of two years was not under any construction of the'1921 act required by any court decision. Subdivisions (3) -and (4) so clearly relate to other classes of eases that they cannot possibly apply to him.

. Indeed, it is not clear how it came about that he was admitted for two years only as a student, but that limitation was put upon his admission and with that fact he is now faced. He may have been admitted because it was thought that as a student he was entitled to enter temporarily on business or pleasure. It is idle to speculate on the reason now, for, whether it was a good one or not, the conditional entry accorded him was the only one he ever had.

To be sure, his discharge on the writ of habeas corpus did, as we said before, establish his right to remain in this country in spite of the effort then being made to deport him, but, because it did not necessarily require proof that he had been admitted for permanent residence, it now is of no add to him when he must show that fact as a condition precedent to the validity of his petition for naturalization. See U. S. ex rel. Gentile v. Day (C. C. A.) 25 F.(2d) 717.

This petitioner would, no doubt, make a desirable citizen, and it is unfortunate that he was admitted, through no fault of his own, in a way which leaves us powerless to grant the relief he seeks. Perhaps Congress will see fit to do what we cannot.

Petition denied.


author: PER CURIAM.

text:
    STIEFEL v. 14TH STREET & BROADWAY REALTY CORPORATION.
    No. 329.
    Circuit Court of Appeals, Second Circuit.
    April 6, 1931.
    Rehearing Denied April 20, 1931.

      Jasie & Solomon, of New York City (Daniel Levy and William Solomon, both of New York City, of counsel), for appellant.
    David W. Kahn, of New York City, for appellee.
    Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
   PER CURIAM.

The plaintiff, a trustee in bankruptcy, sued the defendant to recover a deposit made by the bankrupt before petition filed, as security for the performance of the covenants of a lease, entered into between it, as lessee, and the defendant, as lessor. The plaintiff is a citizen of New Jersey; the bankrupt and the defendant are corporations organized under the laws of New York. The defendant moved before answer to dismiss the action because the District Court had no jurisdiction over it under section 23 of the Bankruptcy Act (11 USCA § 46); the bankrupt and the defendant both being citizens of New York. This being denied, it repeated the objection in its answer, alleging that it answered at all only because its motion had been overruled. When the cause came on for trial, it again moved to dismiss the action for the same reason, but the judge, feeling bound to follow the decision already made, “tentatively” denied the motion, and the defendant “tentatively” excepted, and “reserved” its right to except further. Nothing more appears in the bill of exceptions, the cause proceeded on the merits, and the Judge directed a verdict for the plaintiff. The first assignment of error is to the judge’s “tentative” denial of the motion to dismiss.

It is of course plain that the bankrupt could not have sued the defendant in the District Court; the parties would have both been citizens of New York. Under section 23a of the Bankruptcy Act, 11 USCA § 46(a), the trustee stood in the bankrupt’s position, and the court was equally without jurisdiction. Section 23b, 11 USCA § 46(b), however, provides that in cases of this kind a trustee may sue only in courts where the bankrupt might have sued, “unless by consent of the proposed defendant,” and the question has arisen whether this by implication gives jurisdiction to the District Court in case such consent is given. If section 23b affects substantive jurisdiction, as distinct from venue, section 23a appears to be redundant, for it adds nothing to what follows, and for this reason it was decided in Matthew v. Coppin, 32 F.(2d) 100 (C. C. A. 9), and Coyle v. Duncan Spangler Coal Co. (D. C.) 288 F. 897, that section 23b has nothing to do with jurisdiction, properly speaking. As much was said obiter in Lovell v. Isidore Newman & Son, 227 U. S. 412, 426, 33 S. Ct. 375, 57 L. Ed. 577; and McEldowney v. Card (C. C.) 193 F. 475, 480; and Bush v. Elliott, 202 U. S. 477, 483, 26 S. Ct. 668, 50 L. Ed. 1114, looks the same way. On the other hand, the opposite was held in Re White, 177 F. 194 (C. C. A. 7), and some of the language in Bardes v. Hawarden First Nat. Bank, 178 U. S. 524, 538, 20 S. Ct. 1000, 44 L. Ed. 1175, may perhaps be read as in accord. Without deciding the point, we may, however, assume arguendo that the defendant’s consent would have conferred substantive jurisdiction here.

It was never given; indeed, it was refused. Objection to the jurisdiction was first taken by special motion, again in the answer, and finally at the trial. It is true that the defendant only “tentatively” excepted at that time, but this went as far as the court had ruled, and nothing more was then possible. The Judge’s ruling was final, unless he changed his mind; he had said that he was bound to follow his predecessor, as he perhaps was, and since he never showed any disposition to reconsider, it would be absurd to impute any consent to the defendant because it did not bring up the question again. The record is an effective answer to any implication of consent arising from the defendant’s contest of the cause upon the merits.

It is true that in this court the point, though it is among the errors assigned, was not argued. But that makes no difference. As the cause stood in the District Court, when it was removed by the appeal, that court had' no jurisdiction over it; the judgment was non eoram judice, and the defendant’s failure to press it in this court could have no effect there.

The judgment must be reversed, and the cause remanded, with instructions to dismiss for lack of jurisdiction. If the defendant chooses to consent to the jurisdiction of the District Court after remittitur, the point we have not decided will be raised. We have not passed upon it against that possibility, because it seems doubtful whether the defendant will wish to consent in any event. Moreover, in the light of the decisions we have cited, any jurisdiction so acquired must be doubtful at best; and both parties may well prefer to have the new trial, if there is to be one, take place in the state court, whose jurisdiction is not open to question.

Judgment reversed; cause remanded, with instructions to dismiss for lack of jurisdiction, unless the defendant consents in the District Court, in which event the question of jurisdiction is open for the decision of that court in the first instance.

On Petition for Rehearing.

The basis of the petition is that, until the defendant canceled the lease, the bankrupt could not reclaim the deposit; that, as the lease continued until after the trustee was appointed, the cause of action was the trustee’s, and that jurisdiction depends upon his citizenship, not upon the bankrupt’s. So far as we can see, the same reasoning would apply to a contract falling due after petition filed, or to a bond conditional upon a default then occurring. We do not so read section 23a (11 USCA § 46 (a). It touches “controversies * * * between trustees as such and adverse claimants concerning the property acquired or claimed by the trustees,” and covers all controversies relating to such property, whether upon a cause of action arising before or after petition, so long as it “concerns” the bankrupt’s property. We may ignore, section 23b (11 USCA § 46 (b) for the reasons already given in our first opinion.

McEldowney v. Card (C. C.) 193 F. 475, was quite different; the trustee was suing upon a contract made by him, for the sale of the bankrupt’s property. The action could by no stretch be said to “concern” the bankrupt’s property, and the language relied upon is to be read in connection with the facts. In Re Baudouine, 101 F. 574, we had before us a summary proceeding to compel a testamentary trustee to turn over to the trustee in bankruptcy the income of a trust made for the bankrupt, f ailing due after petition filed. All we decided was that summary proceedings would not lie, but we went further obiter, and said that the District Court might entertain a plenary suit under section 2, subdivision 7 (11 USCA § 11 (7). In spite of some uncertainties in expression we understand our argument to have been that section 23 comprehended only causes of action arising before petition filed, and that section 2 (7) covered all others. Bardes v. Hawarden Bank, 178 U. S. 524, 20 S. Ct. 1000, 44 L. Ed. 1175, overruled our conclusion, though it might still be true that section 23 was limited as we said. But Bardes v. Hawarden Bank was itself a suit to set aside a preference and a fraudulent transfer, and was therefore upon a cause of action on which the bankrupt could not have sued. Page 537 of 178 U. S., 20 S. Ct. 1000. It is true that it only decided that such a suit could not be brought in the District Court; but the discussion presupposed that jurisdiction depended upon section 23, and not upon the sections giving general jurisdiction to the Circuit Court. Thus it appears to us that all of the reasoning in Re Baudouine, by which we reached our erroneous conclusion, must be treated as overruled. The case has not been the basis of any other decision except Judge Hough’s in Skillin v. Magnus (D. C.) 162 F. 689, itself overruled in Kelley v. Gill, 245 U. S. 116, 38 S. Ct. 38, 62 L. Ed. 185. We can find no other ease in which the question is discussed, though tenuous inferences may perhaps be drawn from the expressions in several of the decisions of the Supreme Court, which perhaps tend to support our view. The color they give is too faint to justify citation.

We adhere "to our ruling that it is only when the trustee is suing upon a right not derivative from the bankrupt that jurisdiction depends upon his citizenship; in all eases directly arising out of the bankrupt’s property, it is the bankrupt’s citizenship that controls.

Petition denied.


author: LEWIS, Circuit Judge.

text:
    SKEEN v. LYNCH et al.
    No. 235.
    Circuit Court of Appeals, Tenth Circuit.
    March 30, 1931.

      Tom W. Neal, of Lovington, N. M., for appellant.
    J. M. Hervey, of Roswell, N. M. (Edward M. Freeman, of New York City, Reid, Hervey, Dow & Hill and Emmett Patton, all of Roswell, N. M., and G. U. McCrary, of Artesia, N. M., on the brief), for appellees.
    Before LEWIS and COTTERAL, Circuit Judges, and POLLOCK, District Judge.
   LEWIS, Circuit Judge.

The bill in this suit, dismissed on motion, contains two counts. The first alleges that appellant Skeen, plaintiff below, entered on February 8, 1924 for agricultural purposes and his homestead a described 640 aeres of land in Lea County, New Mexico; that at the time of entry no part of the land had been withdrawn from entry as valuable for coal or gas, or as being on the structure of a producing oil and gas field, but had been classified as stockraising lands; that appellant’s said entry was made under the Act of December 29, 1916 (39 Stat. 862 [43 USCA § 291 et seq.]), which provided that all the coal and other minerals shall be reserved to the United States; that plaintiff received on March 11, 1929 a certificate of payment in full for said land, and patent therefor issued to him on June 22, 1929'. The patent, attached as an exhibit, contains this: “Excepting and reserving, however, to the United States all the coal and other minerals in the lands so entered and patented, together with the right to prospect for, mine, and remove the same pursuant to the provisions and limitations of the Act of December 29,1916 (39 Stat. 862).” It is then alleged that plaintiff is the owner of the water, oil and gas in and under said land, and that “said reservation in the said Act of Congress only reserved to the United States the ‘coal and other minerals’ of a solid and similar nature to coal”, and did not reserve the oil and gas; that the defendants are claiming some interest or title to and right to produce and appropriate the water, oil and gas from said lands adverse to the title of plaintiff, which claims constitute a cloud on plaintiff’s title. There is a prayer that plaintiff’s title to the water, oil and gas in and under said lands be quieted and set at rest, and that defendants be perpetually enjoined from claiming any interest or right in the production of, or right to produce or take the water, oil or gas under said lands.

The second count alleges again plaintiff’s entry and the issuance of patent to him; that plaintiff was by law the owner of and possessed of a preference right above all others to prospect for and produce oil and gas from said land; that defendant Lyneh, with full knowledge of plaintiff’s preference rights, applied, after plaintiff had entered the land, to the Land Department for a permit to prospect for and drill for oil and gas on said 640 acres, and the Secretary of the Interior in May, 1926 issued to her such permit and’ in event of discovery she was to receive an oil and gas lease from the United States; that plaintiff had no knowledge of the application for said permit nor of its issuance until long thereafter; that the Secretary in issuing said permit erred in his construction of the Act of February 25, 1920 (41 Stat. 437) in holding that plaintiff had no preference right to a permit and lease upon said land and in issuing said permit to Beulah Y. Lynch without notice to him, and he was thereby deprived of his said right without due process of law. That Beulah Y. Lyneh and her co-defendants, to whom she had assigned some right or interest in and to said permit and a prospective oil and gas lease on said lands in the event of discovery, have thereby constituted themselves trustees for plaintiff of the rights which they obtained and expect to procure under said permit; that all of said assigns took their assignments with knowledge of plaintiff’s preference right. The prayer on this count, in the alternative and in the event plaintiff is denied relief on the first count, is: “That the title to said permit covering the lands described herein, so issued to the said Beulah Y. Lyneh, be decreed to be in the plaintiff herein, and that the title therein and thereto be forever quieted in this plaintiff, and that the defendants and each of them be, upon the final hearing hereof, forever restrained and enjoined from claiming or asserting any right, title or interest therein or thereto adverse to the rights of this plaintiff.”

As to the first cause of action, the court is of the opinion that the United States is an indispensable party. The plaintiff asserts title to the oil and gas under the said 640 acres. The United States in its patent conveying the lands to appellant excepted and reserved to itself “all the coal and other minerals in the land so entered and patented, together with the right to prospect for, mine. and remove the same pursuant to the provisions and limitations of the Aet of December 29, 1916 (39 Stat. 862)”; and in its certificate of final proof and payment issued to plaintiff March 11,1920, this was contained: “Patent to contain reservation of coal and other minerals, and conditions and limitations as provided by Act of December 29,1916 (39 Stat. 862).” The bill shows that defendants named claim no interest in the oil and gas other than as permittees and prospective lessees of the United States. The interest of the United States in the subject matter in litigation is not less obvious and substantial than it was in the ease of Louisiana v. Garfield, 211 U. S. 70, 29 S. Gt. 31, 53 L. Ed. 92, in which it was held to be an indispensable party. The bill discloses the claim of ownership of the oil and gas made by the United States. Section 9 of the Stockraising Homestead Act (39 Stat. 862 [43 USCA § 299]) expressly provides that all the coal and other minerals in the land so entered shall be reserved to the United States, and that all entries and patents shall so state, and that there shall also be reserved the right to prospect for, mine and remove the minerals reserved, and that they shall be disposed of by the United States in accordance with the coal and mineral land laws. A decree for plaintiff on the first count would be a cloud on the title of the United States, and its permittee and prospective lessee would be subject to ouster if she continued to attorn to the United States. In New Mexico v. Lane, 243 U. S. 52, 37 S. Ct. 348, 61 L. Ed. 588, the state claimed title to forty acres under Congressional grant and prayed that it be adjudged the owner. A certificate of purchase of the forty acres as coal land had been issued to one Keepers by the United States. Held, Keepers was an indispensable party. In California v. Southern Pacific Co., 157 U. S. 229, 15 S. Ct. 591, 599, 39 L. Ed. 683, it was held that “if the rights of those not before the court are inseparably connected with the claim of the parties litigant, so that a final decision cannot be made between them without affecting the rights of the absent parties,” the court cannot proceed with the adjudication in their absence; that “the familiar rule in equity, * * * is the doing of complete justice by deciding upon and settling the rights of all persons materially interested .in the subject of the. suit, to which end such persons should be made parties.” See also American T. & S. Bank v. Scobee, 29 N. M. 436, 224 P. 788. Story’s Equity Pleadings (10th Ed.) § 138: “In the next place, an interest of the absent parties in the subject-matter, ex directo, which may be injuriously affected, is not indispensable to the operation of the general rule; for, if the defendants actually before the court may be subjected to undue inconvenience,- or to danger of loss, or to future litigation, or to a liability under the decree, more extensive and direct, than if the absent parties were before the court, that of itself, will, in many cases, as we shall presently see, furnish a sufficient ground to enforce the rule of making the absent persons parties.” So much for the first count. The motion to dismiss it on the ground that the United States was an indispensable party was well taken.

The second count goes on the assumption that the oil and gas was reserved to the United States by the Aet of December 29, 1916 and the patent in accordance therewith; and then alleging that plaintiff had a preference right to a prospecting permit and lease under section 20 of the leasing aet of February 25, 1920 (41 Stat. 445 [30 USCA § 220]), he seeks to hold Beulah V. Lynch and her assigns as his trustees ex maleficio.

We accept the assumed fact as irrefutable. The legislative history of the Stoekraising Homestead Act when it was reported for passage including the discussion that followed relevant to this subject leave us no room to doubt that it was the purpose of Congress in the use of the phrase “all coal and other minerals” to segregate the two estates, the surface for stockraising and agricultural purposes from the mineral estate, and to grant the former to entrymen and to reserve all of the latter to the United States. In that respect the case is well within the rule announced in Work v. Braffet, 276 U. S. 560, 566, 48 S. Ct. 363, 72 L. Ed. 700; United States v. St. Paul, M. & M. Co., 247 U. S. 310, 318, 38 S. Ct. 525, 62 L. Ed. 1130; and United States v. Forty Barrels and Twenty Kegs of Coca-Cola Co., 241 U. S. 265, 281-283, 36 S. Ct. 573, 60 L. Ed. 995.

Appellant relies on the rule that general words may be restrained by particular words —ejusdem generis — to sustain the first count. The functions and limitations of that rule are stated in Danciger v. Cooley, 248 U. S. 319, 326, 39 S. Ct. 119, 63 L. Ed. 266; Cutler v. Kouns, 110 U. S. 720, 728, 4 S. Ct. 274, 28 L. Ed. 305; Mason v. United States, 260 U. S. 545, 554, 43. S. Ct. 200, 67 L. Ed. 396; and Webber v. Chicago, 148 Ill. 313, 36 N. E. 70. But again, immediately following the mineral reservation clause in said aet (section 9) is this: “The coal and other mineral deposits in such lands shall he subject to disposal by the United States in accordance with the provisions of the coal and mineral land laws in force at the time of such disposal.” We can conceive of no reason or purpose for including in that sentence the words “and other mineral” and “and mineral” had it been the intention to reserve only coal and the like, — noseitur a soeiis. Had that been the purpose the sentence would have appropriately read: The coal deposits in such lands shall be subject to disposal by the United States in accordance with the provisions of the coal land laws in force at the time of such disposal. In our opinion all mineral in the 640 acres was reserved to the United States.

As to plaintiffs claim of preferential right to the permit and lease, — the Secretary of the Interior has uniformly held that section 20 of the leasing Act of February 25, 1920 was intended to serve a special purpose; that it is a relief section and was based upon claimed- equities of those who had gone upon the publie domain and made entries under the 160 or 320 acre homestead law, neither of which contained any reservation of minerals, in the belief that they would obtain unrestricted titles; that the entry must have been made prior to February 25, 1920; that it must have been made without reservation of minerals on unwithdrawn lands, not classified as mineral, and not known to be valuable for its mineral deposits at date of entry, and that section 20 had no application to entries of stockraising homesteads made after the leasing act, nor to such entries made pri- or to the leasing act, because such entries themselves provided for reservation of mineral deposits. See: Charles R. Haupt, 47 Land Dec. 588 ; Charles R. Haupt, 48 Land Dee. 355; Johnson v. Patten, 49 Land Dec 613; Blakeney v. Womack, 51 Land Dec. 622. The weight to be given to the construction of legislation by administrative officers who are charged with its application, where its provi- . sions are at all in doubt or uncertain, is settled. Their construction of the statute is said to be in the highest degree persuasive if not controlling. United States v. Hammers, 221 U. S. 220, 225, 31 S. Ct. 593, 55 L. Ed. 710. Said section 20 of the leasing act, insofar as pertinent here, reads: “In the case of lands bona fide entered as agricultural, and not withdrawn or classified as mineral at the time' of entry, * * * the entryman or patentee, or assigns, where assignment was made prior to January 1, 1918, if the entry has been patented with the mineral right reserved, shall be entitled to a preference right to a permit and to a lease, as herein provided, in case of discovery. * * * ” This entry was not made until four years after the leasing act took effect, and the patent was not issued until nine years thereafter. Sections 13, 14 and 17 of the act (30 USCA §§ 221, 223, 226) contain general provisions for permits and leases by the Unitéd States of the mineral reservations. No sound reason is suggested for the inclusion of section 20 in said act unless it was intended to serve a special purpose, and we agree with the views of the Secretary as to the purpose it was to serve. The court did not err in dismissing the second count.

Affirmed.


author: VAN VALKENBURGH, Circuit Judge.

text:
    TABOR v. UNIVERSAL EXPLORATION CO.
    No. 8739.
    Circuit Court of Appeals, Eighth Circuit.
    March 30, 1931.

      Allen McReynolds, George J. Grayston, and Charles M. Grayston, all of Joplin, Mo., for appellant.
    Haywood Scott and A. E. Spencer, both of Joplin, Mo., for appellee.
    Before STONE and VAN YALKENBURGH, Circuit Judges.
   VAN VALKENBURGH, Circuit Judge.

Appellee is a New Jersey corporation licensed to do business in the state of Missouri and engaged in mining operations at Joplin in said state. Some time prior to May 14, 1927, appellee was pamed as lessee in a mining lease covering the following described property:

“All of the Southeast Quarter (S. E. %) of the Northwest Quarter (N. W. *4) of Section Fourteen (14) Township Twenty-nine (29) Range Thirty-four (34) containing Forty (40) acres more or less.”

On the last-named date appellant and appellee entered into a contract whereby appellant agreed to buy all the right, title, and interest of appellee in- and to said property above described, and also in and to a certain concentrating plant in said contract described, “including all buildings, scales, office, power-plant, pumps, and all mining and concentrating machinery in said plant, and in the underground workings of said mine, and all tools and other equipment and personal property belonging to and used in connection with said mill and mine, and now upon said land.”

The consideration stated was a cash payment of $10,000, a second payment of $20,-000 oh or before ninety days from date of contract, and thereafter additional payments at stated periods, making the entire purchase price, including the initial payment, total $75,000. Coincident with the execution of this instrument, appellee agreed to and did deposit in escrow with the Conqueror Trust Company of Joplin, Mo., a proper assignment of the lease in question and a proper bill of sale transferring the other property above described, to be delivered to appellant when the purchase price should be fully paid, and with instructions to the escrow agent to return said instruments to- appellee as and when “appellant shall fail to pay any installment, together with interest thereon, where interest is provided to be paid, in accordance with the terms and provisions of this contract, and upon the date specified herein.” This contract of May 14, 1927, contained the further explicit conditions:

“In the event the Party of the Second Part shall fail to make any payments provided herein, as, and when, due this contract shall thereupon terminate, and the Party of the Second Part shall immediately surrender the peaceable possession of said land lease, mine, buildings, machinery, tools, equipment and other property to the Party of the First Part, save and except ore then in the bin, and shall not be liable to- the Party of the First Part for any of the unpaid installments, and the Party of the First Part may retain all payments theretofore made as liquidated damages for the failure of the Party of the Second Part to make said payments, as herein specified.

“The Party of the Second Part agrees that in the event he shall fail to carry out and perform any of the provisions of this agreement, as herein provided to be kept and performed by him, or shall fail to perform and carry out any of the terms and provisions of the mining lease above mentioned as therein specified, he will at the request of the Party of the First Part quit and surrender the peaceable possession of said land, mine, mill, buildings, tools, machinery and equipment, and also agrees that, if he shall elect not to continue the payments herein provided to be made by him he will immediately quit and surrender the peaceable possession of said land, mine, mill, buildings, tools and machinery and equipment to the Party of the First Part.

“Party of the Second Part agrees that, upon any such termination of this contract because of his election to quit and surrender same, or .because of his violation of any of the terms and provisions of this agreement, or of the lease above mentioned, he will return said mine, mill, buildings, machinery, tools and equipment to the Party of the First Part in the same condition he shall have received them, ordinary wear and tear alone excepted.”

February 2, 1928, appellee made written demand upon appellant for all the property in his hands, possession of which had theretofore been delivered under the provisions of the contract of May 14, 1927, and upon the escrow agent for the return of the instruments deposited with it. The stated grounds for these demands were that appellant had failed to carry out and perform the provisions of said written contract, had failed to pay, as and when specified, the installments of the purchase price provided therein, had failed to perform and carry out the terms and provisions of the mining lease, “having elected not to continue the payments due said Universal Exploration Company as provided in said contract dated May 14, 1927, and thereby having relieved yourself of making any further payments due said Universal Exploration Company provided in said contract to be made by you.” On the same day receipt of this demand was acknowledged by appellant in. the following language:

“The undersigned acknowledges receipt of your demand for possession of the land and property therein described, to-wit: The Southeast Quarter of the Northwest Quarter of Section Fourteen, Township Twenty-nine, Range Thirty-four, in Jasper County, .Missouri, including mine, mill, buildings, tools, machinery, and equipment also mentioned in said demand, dated February 2, 1928, and hereby surrenders possession of the said land and property demanded in accordance therewith; reserving the right to prosecute the pending suit or any other appropriate action to recover the amounts theretofore paid on the purchase price of said property and expenditures made, thereon.”

It appears from the record that, at the time this demand was made, and receipt thereof acknowledged, there was pending a suit by appellant against appellee “based upon charges of fraud in the inducement to the contract.” That suit was filed November 14, 1927, and was dismissed without prejudice subsequently to February 2, 1928. The suit now on appeal was then filed, and upon demurrer the court held that the original petition stated a case in tort, and the demurrer was overruled. However, on June 17, 1929, appellant filed an amended petition, which is long and somewhat involved. It recites the assignment of this lease and the bill of sale from appellee to appellant, that appellee falsely and fraudulently, for the purpose of deceiving appellant and inducing him to purchase the said lease and other mining property, represented that the pay ore in said mine was not exhausted and that the falls, drifts, and underground workings in said mine showed, in place, ores of a percentage averaging above 4.03 percentage recovery; such ore being and appearing in all the drifts to such an extent and in such condition as to enable an operator profitably to resume operations upon the ore then in sight, and that drilling ahead of the workings showed the continuation of ore of as-high a percentage and in such quantities that, after leaving sufficient pillars, ore could be profitably produced therefrom to the extent of not less than nine thousand tons of concentrates; that, if this had been true, the property would have been well worth the purchase price; that these representations were false and known so to be by appellee which had theretofore operated the mine, had cut and removed therefrom all the pay ore showing therein sufficient to justify further operations, and had abandoned the property, shut down the pumps, and allowed the underground workings to fill with water. The amended petition states that appellee, in furtherance of its wrongful purpose, refused to give appellant an option or opportunity to investigate the mining property after drainage, falsely represented that other prospective purchasers were willing and ready to take the property, and by these and other means induced appellant to close the transaction in reliance upon the representations made. Appellant states that he made the cash payment of $10,000, entered upon the property, and undertook to operate it, went to considerable expense in that behalf, and paid the second installment of $20,000 before he ascertained that the actual conditions of said mine were and are such that the same is not and was not reasonably worth any sum whatsoever, except as to the value of the tangible property, which will not exceed the sum of $10,'000. He therefore elected to go no farther with the enterprise. There followed the demand, the acquiescence therein, and the return of the property in accordance with tie terms of the contract as hereinabove set out. While pleading this situation in connected form, appellant states that, while his original suit was pending, he learned that the assignment of this lease to appellee’s immediate predecessors in title was void because of the failure of the Butte-Kansas Company, their grantor, to comply with the laws of Missouri ’ governing the transaction of business in said state by foreign corporations; that for this reason - this so-called mining lease was void, and that appellant acquired no title in it; that, if appellee had knowledge of this situation, it concealed the same, and, if it had no such knowledge, the contract was entered into by mutual mistake. The petition concludes with the following allegations respecting appellant’s conceived grounds of recovery :

“Plaintiff further states that by reason of the fraud and misrepresentations aforesaid in the inducement to the plaintiff to enter into said contract, and the payment by the plaintiff to the defendant of the sum of Thirty Thousand Dollars ($30,000.00) prioy to knowledge or information of such fraud and misrepresentations and the return and surrender of the said property and the acceptance thereof by the defendant, the defendant became and is obligated to return or refund to the plaintiff the said sum of ($30,-000.00) Thirty Thousand Dollars.
“Plaintiff further states that by reason of the invalidity and illegality of the said mining lease upon the facts hereinbefore stated, and the return and surrender of- the said property to the defendant and its acceptance thereof, as hereinbefore stated, the defendant became obligated to return and refund to the plaintiff the said sum of Thirty Thousand Dollars ($30,000.00) so paid by the plaintiff to the defendant upon the purchase price of said property as aforesaid.”

To this petition appellee interposed its demurrer upon several grounds, the following of which were sustained by the court:

“1. That the plaintiff has mingled, in his petition, alleged cause of action arising out of contract with an alleged cause of action arising out of tort.
“2. That plaintiff’s said alleged causes of action ex contractu and his alleged cause of action ex delicto cannot be united in the same petition.
“3. That the different alleged causes of action attempted to be set up by plaintiff in his said petition do not belong to one class as required by law.”

Appellant was given leave to file a seeond amended petition within ten days. He declined to plea further, and this appeal followed.

Section 1221, Rev. St. Mo. 1919; is the authority upon which this ruling was based:

“Causes of Action that May be United in the Petition. — The plaintiff may unite in the same petition several causes of action, whether they be such as have been heretofore denominated legal or equitable, or both, where they all arise out of: First, the same transaction or transactions connected with the same subject of action; or, second, contract, express or implied; or, third, injuries, with or without force, to person and property, or either; or, fourth, injuries to character; or, fifth, claims to recover real property, with or without damages for the withholding thereof, and the rents and profits of the same; or, sixth, claims to recover personal property, with or without damages, for the withholding thereof; or, seventh, claims by or against a party in some representative or fiduciary capacity, by virtue of a contract, or by operation of law. But the causes of action so united must all belong to one of these classes, and must affect all the parties to the action, and not require different places of trial, and must be separately stated, with the relief sought for each eause. of action, in such manner that they may be intelligibly distinguished.” ,

Under this statute the Missouri courts have consistently held that a cause of action ex contractu cannot be joined with one ex delicto. That statute “is not only not authority for joining in one petition different classes of actions, such as ex contractu and ex derlieto, but it forbids such junction. Notwithstanding the adoption of the Code, the distinction between actions ex contractu and ex delicto still exists. They do not belong to the same class.” Hodgson-Davis Grain Co. v. Hickey (Mo. App.) 200 S. W. 438, 439; Southworth Co. v. Lamb, 82 Mo. 242; Sumner v. Rogers, 90 Mo. 324, 2 S. W. 476; Johnson v. Brill et al. (Mo. Sup.) 295 S. W. 558; Peycke Bros. Com. Co. v. Davis, 215 Mo. App. 545, 257 S. W. 824; Hockley v. Hulet Bros. Storage & Moving Co. (Mo. App.) 16 S.W.(2d) 749.

The sole matter of inquiry, therefore, on this appeal is whether the amended petition mingles an alleged cause of action arising out of contract with one arising out of tort, as held by the trial court. The rules governing the determination of this crucial question are so well stated by Corpus Juris, as gleaned from the very great number cited of decisions rendered throughout the United States in federal and state jurisdictions, that we find it of advantage at the outset to quote liberally:

“The test of whether more than one cause of action is stated in a complaint is whether there is inore than one distinct primary right or subject of controversy presented for enforcement or adjudication, and not whether there are different kinds of relief prayed or objects sought. In applying this test it is to be observed that, without giving rise to more than one cause of action, plaintiff’s primary right and defendant’s infringement thereof, which taken together constitute the cause of action, may eaeh be very complicated, and may involve a number of subordinate rights or incidental matters. In determining this question regard should be had to the substance rather than to the form of the complaint, for a complaint may in fact state different causes of action, although they are stated in the form of one, or it may state but one cause of action, although it is stated in the form of several. In doubtful eases it may be proper to consider the form of the complaint, or the relief demanded or object sought, but neither is controlling. Nor will the actual intention of the pleader control, for the complaint may state several causes of action, although it was intended, to state but one; and conversely, if the facts alleged constitute but one cause of action, it is not material that plaintiff may have intended to state more than one, or has in express terms alleged that he has done so.

“In accordance with the principles above stated, if the facts alleged in a declaration, complaint, or petition show but one distinct primary right on the part of plaintiff, and one delict or wrong on the part of defendant involving that right, there is but one cause of action stated. This is true, although incidental matters are alleged in connection with the primary right, which render other parties than the main defendant proper or neeessary to the litigation, or although facts are stated which, while germane to the primary purpose of the action, might constitute independent grounds of relief; and where a single transaction is relied on, the complaint does not necessarily state two causes of action, because the facts alleged may show a liability both in contract and in tort. It is not necessary that the wrong shall consist of a single act, or that the resulting injuries consist of but a single element; and the amount sought to be recovered may be made up of several items. The .complaint may, without stating, more than one cause of action, set forth different, grounds or theories upon which plaintiff is entitled to the same relief, or may set forth different means or methods employed in accomplishing the same wrong.” 1 C. J. §§ 190 and 191, pp. 1055, 1056,1057.

Applying the test thus defined, we are persuaded that the amended petition states but a single cause of action or primary right, although by way of inducement a number of subordinate rights, or incidental matters, are involved, and described with such completeness that some or all of them might be regarded as stating a cause or causes of action, if such were the primary object of the litigation. To arrive at this we take the petition as a whole — the charging part and the prayer for relief. So considered, we find a significant departure from the ordinary elements of a tort action. In such the relief sought is for damages suffered. In this petition it is alleged that appellant paid out $30,000 by way of payments, and suffered a development loss of $6,540.63 before the alleged fraud was discovered. But it does not pray damages in these amounts, nor at all. It asks the return of the $30,000 paid as for money had and received. It asks repayment of the same amount because of alleged failure of title and consideration. Both of these grounds of recovery sound in contract. Eaeh is an additional ground for the same single recovery sought. Both, if sustained by the proofs, would furnish foundation for rescission, and, upon rescission, recovery of the payments made would follow as a necessary incident. In fact, appellant treats this action substantially as one for rescission, because of the cancellation of the contract and lease and the return of the properties to appellee — in effect the same as would have followed a decree of rescission. This action, however, is not one to rescind. The petition does not so declare. The return of the property was made under the terms of the contract for lease, and, if that contract governed, appellant would be without remedy, because, upon failure to pay as stipulated, and abandonment of the enterprise, all prior payments were to be forfeited as liquidated damages. But, before the demand was made by appellee, and before the properties were returned pursuant thereto, appellant had filed, and there was then pending, a suit to recover the amounts theretofore paid on the purchase price of the said property. In returning that property as demanded, appellant reserved the right to prosecute the pending suit or any other appropriate action. We have no knowledge of the form of the then pending action, which was dismissed without prejudice, nor of the original petition in the cause before us. The record is silent as to both, and we are confined to a consideration of the amended petition.

If appellant had sued to rescind the contract with appellee, and to cancel the lease upon the grounds stated in this aetion, and had sustained his allegations of fraud and failure of title, it cannot he doubted that he could have recovered the purchase money paid. Now, that the properties have been restored to appellee, as they would have been if the contract had been formally rescinded, is there any legal reason why appellant may not have the relief prayed if he pleads and proves the same state of facts which would have entitled him to a decree of rescission? In such ease, the law will imply a promise on the part of the wrongdoer to reimburse the party injured by his act.

“Statement in the petition of a tort involved in the cause of aetion will not nullify right to aetion for money had and received.” Walton et al. v. Chalmers (Mo. App.) 205 S. W. 90.

It is true that, in the action for money had and received, such a recitation of the wrong suffered may be omitted, but that recitation, if sustained by the proofs, would make it clear that appellee has received and retains money which in good conscience belongs to appellant, and that is the gist of the action. This view of the law is sustained by abundant decision: Byxbie et al. v. Wood, 24 N. Y. 607; Crigler v. Duncan, 121 Mo. App. 381, 99 S. W. 61; Brewer v. Dyer, 7 Cush. (Mass.) 337; Lipman, Wolfe & Co. v. Phoenix Assurance Co. (C. C. A. 9) 258 P. 544; Board of Commissioners of Kay County v. Pollard-Campbell Dredging Co. (C. C. A. 8) 251 F. 249.

In Sanford v. First National Bank (C. C. A.) 238 P. 298, 301, Judge Amidon, speaking for this court, quotes from the opinion of Chief Justice Mansfield in Moses v. Macferlan, 2 Burrow, 1005, as follows:

“It [the aetion for money had and received] lies for money paid by mistake, or upon a consideration which happens to fail or for money got through imposition (express or implied) or extortion, or oppression, or an undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances.”

The tort, arising from the fraud alleged to have been committed, may be waived and recovery had in an action ex contractu.

“Even where there is no express contract, and the cause of action arises out of tort, the tort may be waived and an action of contract brought in all eases where the law will imply a promise on the part of the wrongdoer to reimburse the party injured by his aet.” 1 C. J. par. 158, pp. 1031 and 1032.

In such ease assumpsit lies for money had and received. Wood on Limitations (4th Ed.) vol. 1, par. 21, p. 95; Burgoyne v. McKillip (C. C. A. 8) 182 P. 452; Eastwick v. Hugg, 1 Dall. 222,1 L. Ed. 109; D’Utricht v. Melchor, 1 Dall. 428,1 L. Ed. 208; Fenemore v. United States, 3 Dall. 357, 1 L. Ed. 634; Chesapeake & Ohio Canal Col v. Knapp, 9 Pet. 541, 565, 9 L. Ed. 222; United States v. State Nat. Bank, 96 U. S. 30, 35, 24 L. Ed. 647; Louisiana v. Wood, 102 U. S. 294, 298, 26 L. Ed. 153; Ankeny v. Clark, 148 U. S. 345, 13 S. Ct. 617, 37 L. Ed. 475; Lip-man, Wolfe & Co. v. Phoenix Assurance Co. (C. C. A. 9) 258 P. 544.

We do not wish to be understood as expressing or intimating any opinion upon the merits of this controversy. We think, for the reasons stated, that in the amended petition there was no misjoinder nor improper commingling of causes of aetion in violation of the Missouri practice aet, and therefore that the demurrer was improperly sustained' upon that ground. The judgment below is' accordingly reversed, and the case remanded for further proceedings in harmony with the views herein expressed. It is so ordered.


author: WATSON, District Judge,

text:
    DELAWARE, L. &. W. R. CO. v. BERRY.
    No. 4453.
    Circuit Court of Appeals, Third Circuit.
    March 31, 1931.

      Frederic B. Scott, of New York City, for appellant.
    De Voe Tomlinson and Coult, Satz & Tomlinson, all of Newark, N. J., for appellee.
    Before DAYIS, Circuit Judge, and THOMSON and WATSON, District Judges.
   WATSON, District Judge,

This action was under the Federal Employers’ Liability Act (45 USCA §§ 51-59) to recover damages for personal injuries to plaintiff while he was in the employ of the defendant. The trial resulted in a verdict for the plaintiff, and from the judgment entered thereon the defendant appealed.

At the time of the injury complained of, plaintiff was employed by the defendant ás a policeman at Port Morris Transfer. It was his duty to inspect at that point the railroad cars, especially those containing valuables. He worked from 7 p. m. until 7 a. m. at the Port Morris Transfer station. On the north side of the transfer platform there were several tracks. The first track was called No. 2; the second track No. 1. These tracks, were used for transferring freight. The third track was called “Receiver.” At the time of the accident, it was also being used for transfer. The fourth track was known as a running track. It carried main-line traffic. Hereinafter it is referred to as track No. 4.

The plaintiff had received orders to inspect a certain ear which was to come in on track No, 4. He and his co-worker had worked for seven years inspecting ears at Port Morris Transfer, and, when they inspected the same train, one usually took one side of the train and the other took the other side. When they saw on track No. 4 the train with the car which was to be inspected, they left the platform, crossed over track No. 2 and track No. 1. To do this, they were required to pass between standing ears which were about 100 feet apart on the tracks. The plaintiff, when he reached the receiving track (track No. 3), looked both up and down the track, and, seeing nothing approaching, started to cross. As he was doing so, he was hit by a box ear,- thrown into the center of the track, and the wheels of the ear ran over him and severed his right leg. The train, after passing over him, collided with cars which stood on the east end of the same track.'

The plaintiff claimed that, during the time that he had worked at the Transfer Station at Port Morris, there existed a custom of having lights upon the leading ends of cars running through the yards at nighttime. In support of this claim, the plaintiff produced evidence.

As to whether there was such a custom was a question of fact for the jury. The plaintiff seems to have relied upon such a custom. There was evidence that no light was displayed and no warning given of the approaching of the train. Plaintiff contended that the absence of the light was a negligent omission, and warranted a recovery of damages. The jury apparently took the same view.

The defendant assigns as error the refusal of the court to charge the jury as requested in its first and third points for charge.

As to the first point, the court stated that he did not think it was objectionable, and would undoubtedly have charged the jury, as requested in the point, had he not been led to believe from the remarks of counsel for the defendant that he objected to having the point read, under which circumstances the court was justified in not reading it, and the defendant should not be permitted to take advantage of the court’s failure to charge as requested in the point.

The third point for charge reads as follows :

“3. The defendant requests the Court to charge, and the Court does charge you that on the evidence in this case it must be held that Berry knew how switching was done in the Port Morris yard, and in the absence of proof that he was exposed to some unusual danger by reason of the departure of the practice generally followed, it cannot be held that the defendant railroad company was in duty bound to give him a warning.”

There was evidence in the case that the practice generally followed was to have lights on the leading ends of cars when moving through the yards in the nighttime, and that this custom was departed from at the time of the injury. It was for the jury to find as a matter of fact whether or not this departure from custom amounted to a negligent omission, and whether plaintiff’s injury resulted therefrom. The court could not as a matter of law charge the jury that there was an absence of proof of unusual danger by reason of this departure from custom. It was not necessary for the plaintiff to show some other unusual danger. Furthermore, the point as drawn is ambiguous and confusing.

The judgment is affirmed.


author: DENISON, Circuit Judge.

text:
    GORCEVICH v. ZURBRICK, District Director of Immigration.
    No. 5589.
    Circuit Court of Appeals, Sixth Circuit.
    April 7, 1931.

      John G. Romanoff, of Detroit, Mich., for appellant.
    Donald B. Frederick, of Detroit, Mich., (John R. Watkins, of Detroit, Mich., on the brief), for appellee.
    Before DENISON, MOORMAN, and HICKS, Circuit Judges.
   DENISON, Circuit Judge.

The alien, having most recently lived in Jugoslavia, and claiming to be a citizen thereof by its laws, sailed for Halifax, from some port not shown by the record. He arrived there March 8, 1927. He was ticketed through to Winnipeg, and the reasonable inference is that he went there. He had been a musician by occupation, and in June, 1927, he was playing in some place across the river from Detroit. From there he entered the United States. Accepting his own version as to the circumstances, his entry was unlawful for at least two reasons — lack of the quota visa on his passport and lack of inspection. Remaining in Detroit, he soon entered into relations with a woman of his nationality by birth, which relations he insists amounted to a valid common-law marriage. She was a naturalized citizen of the United States. February 14, 1928, he was taken upon a warrant of arrest charging that he was unlawfully in this country, because he had entered without inspection and without any proper visa. Following these proceedings, and on February 25, he and the woman citizen were formally married. On April 6, 1928, a warrant for deportation was issued, directing his return to Jugoslavia, the country whenee he came. His application for writ of habeas corpus was dismissed, and he appeals.

In the recent case of Aurel Popa [Po-pa v. Zurbrick (C. C. A.) 45 F.(2d) 583], it appeared that Popa had the United States in his mind as his intended destination when he left his Roumanian home, and came, with some delay, through Canada to our border. It was therefore proper to send him back to Roumania. We find nothing in this record of corresponding effect. The alien’s admission into Canada at Halifax was perfectly regular, and there is nothing to indicate that he intended to use that country as his “thresh-hold” for entering this. Apparently his domicile in Canada was clearly established. Under these circumstances, we think Canada was the country whenee he came [U. S. v. Sisson (C. C. A. 2) 206 F. 450; U. S. v. Flynn (D. C. N. Y.) 22 F.(2d) 302]; and the deportation should have been to Canada. It is now well settled that, if a deportation warrant is erroneous in the name of the country to which the alien is to be deported, the warrant is unlawful, and detention under it is invalid. [Wenglinsky v. Zurbrick, 51 S. Ct. 35, 75 L. Ed.-, Supreme Court, Oct. 13, 1930, reversing (C. C. A.) 38 F.(2d) 985], Although in the Wenglinsky Case the Supreme Court directed absolute discharge, yet there were in that case special circumstances indicating that result; and we think in the ordinary case the Secretary of Labor should have opportunity to issue an amended warrant directing the appropriate deportation. Yee Suey v. Berkshire (C. C. A. 5) 232 F. 143.

It is suggested that Canada may refuse to receive him, and it is appropriate that, while the case is here, we should express our opinion on that contingency. The statute (section 156, title 8, USCA) says: “Or if sueh aliens are held by the country from which they entered the United States not to be subjects or citizens of sueh country, and such country refuses to permit their reentry, or imposes any condition upon permitting re-entry, then [the deportation shall be] to the country of which sueh aliens are subjects or citizens.” It is important to find in the somewhat confused sentence of which the clause just quoted is a part, the antecedent for “sueh aliens” .and the definition of “the country from which they entered.” The section at the outset provides, in a primary way, for deportation to “the country whenee they came,” and then provides alternatives for certain specific situations. The section must be interpreted as a whole; and we think that “sueh aliens,” in the clause quoted, intends to refer, not to some particular classes of aliens which have been specifically .provided for, but to the general class to which the section, as a whole, refers — that is, the aliens whose deportation is “provided for in this subchapter.” In the same way, we think “country from which they entered the United' States,”' in the clause under consideration, is a general term covering the different methods of entry, whether by land or water, and including embarkation for a direct voyage to the United States. It may or may not be the same as the “country whenee they came”; if it is, the Secretary has no alternative choice, but there is no occasion for any; and it follows that, in this (ase, Canada is both the “country whenee he came” and the “country whence ho entered the United States.” It further follows that, in ease Canada should refuse to receive him, the deportation may be to the country of which he is a subject or citizen.

We note also that the warrant of deportation directs that this shall be at the expense of the steamship company which brought him to Canada. We know of no authority for this direction. If the deportation eventually is to Jugoslavia, it is not apparent that the company was in ,any way at fault, actually or constructively, and we find no applicable statute.

Another question requires attention: The appellant has presented and chiefly relied upon the claim that he belongs to a nondeportable class. His argument is based upon supposed analogy to the rule applied by Judge' Brown, of the District Court of Rhode Island, in Dorto v. Clark, 300 F. 568. This was to the effect that, although the woman was plainly deportable under the general provisions of the Immigration Act, yet, by her marriage to an American citizen, she had become entitled, as of right, to a special and summary naturalization; that this right was inconsistent with deportability; and that she was therefore entitled to remain. Along the same line, it is said here that appellant, by becoming the husband of an American citizen, acquired a status inconsistent with his deportability. The specific claim is that, by the Act of May 26, 1924, § 9, and § 4(a), as amended by Act May 29, 1928, § 2 (title 8, USCA § 204(a),- and title 8, § 209(b), appellant, not being otherwise inadmissible, became absolutely entitled to have a non-quota visa and to be admitted thereunder; that, while these provisions were doubtless intended mainly for nonresident spouses who had been married abroad, the ease of a resident spouse, who wishes to go abroad and re-enter, is not excepted by the letter of the law or by its principle;- that therefore appellant, on going back to Canada, would be entitled to re-enter, and that this formal method of exercising his rights might be availed of by appellant, except for the Act of March 4, 1929, (title 8, USCA § 180), which would forever bar his re-entry; and that, therefore, the true purpose of the law giving special rights to an alien spouse — to preserve established domestic relationships— can only be effected by considering him to be now nondeportable.

We have stated this position at length, in order that whatever force it has may be appreciated; but we are not convinced that the general purpose of the act as to alien spouses justifies interpreting it to cover the case of a man who was married in this country after his unlawful entry, and who was, at the time of his marriage, subject to deportation.

The order dismissing the writ of habeas corpus is reversed, and the case remanded for the entry of an order modified in accordance with this opinion, and for further appropriate proceedings.


author: COTTERAL, Circuit Judge.

text:
    LOUIS ILFELD CO. et al. v. SOUTHERN PAC. CO.—PACIFIC SYSTEM.
    No. 343. No. 6520.

      Circuit Court of Appeals, Tenth Circuit.
    April 1, 1931.
    Francis E. Wood, of Albuquerque, N. M. (Owen N. Marron, of Albuquerque, N. M., on the brief), for appellants.
    Del W. Harrington, of El Paso, Tex. (E. R. Wright, of Santa Fe, N. M., on the brief), for appellee.

      Before COTTERAL, PHILLIPS, and MeDERMOTT, Circuit Judges.
   COTTERAL, Circuit Judge.

Appellants complain of an order sustaining a demurrer to their second amended complaint and a judgment dismissing an action they brought'to recover damages for injury to cattle, while being transported from Sonita, Ariz., to Whitman, Neb., under a “Uniform Live Stock Contract.” They alleged delivery of the cattle to appellee, the payment of the freight and the injury in transit due to negligence of the appellee and connecting carriers. They further alleged the delivering carrier was orally notified of the injury and inspected the cattle before removal, and later they duly notified appellee in writing of their claim to the loss.

The ground on which the demurrer was sustained was that they did not allege compliance with section 4e of the contract, which required a shipper, owner, consignee, or agent, before removal or mingling of live stock, to “inform in writing the delivering carrier of any visible or manifest injury to the livestock.”

The controversy in this ease is whether that section is a valid provision of the contract. This depends upon the proper construction of the last proviso to the first Cummins Amendment to the Interstate Commerce Act, enacted on March 4, 1915 (38 Stat. 1196), which in connection with another preceding it reads: “• * * That it shall be unlawful for any such common carrier to provide by rule, contract, regulation, or otherwise a shorter period for giving notice of claims than ninety days and for the filing of claims for a shorter period than four months, and for the institution of suits than two years: Provided, however, That if the loss, damage, or injury complained of was due to delay or, damage while being loaded or unloaded, or damaged in transit by carelessness or negligence, then no notice of claim nor filing of claim shall be required as a condition precedent to recovery.”

The parties difiler in construing the words “notice of claim,” in the statute. Appellants contend that, where negligence is the ground of suit, the language of the amendment was broad enough to render invalid the stipulation for written notice of injury. Appellee insists that such notice was not meant to be excluded, and, the stipulation being valid, the failure to comply with it defeated a recovery.

It must be conceded there is support for appellee’s contention. The “Uniform Livestock Contract” appears to have been prescribed by the Interstate Commerce Commission, and reflects its construction of the Amendment. 64 I. C. C. 357, October 21, 1921; 52 I. C. C. 671, April 14, 1919; 33 I. C. C. 682, May 7, 1915. And doubtless the Commission acted within the powers confided to it by Congress. Missouri Pac. R. Co. v. Porter, 273 U. S. 341, 47 S. Ct. 383, 71 L. Ed. 672. Great weight would have attached to a contemporaneous construction of the proviso if it is ambiguous in meaning. Swift & Co. v. United States, 105 U. S. 691, 26 L. Ed. 1108; Allen, Collector, v. Morsman, Trustee, 46 F.(2d) 891 (8 C. C. A. Feb. 17, 1931); National Lead Co. v. United States, 252 U. S. 140, 40 S. Ct. 237, 64 L. Ed. 496. But it was long delayed and we are not convinced the meaning is in doubt.

Counsel for appellee rely upon decisions holding that a protest against or notice of damage is not a notice of claim required by a bill of lading. Anchor Line, Ltd., v. Jackson (C. C. A.) 9 F. (2d) 543; Duche & Sons v. Mediterraneo (D. C.) 31 F. (2d) 496. In addition, several decisions in the state courts are cited which sustain defenses based on stipulations which required notice of injury. But none of these eases construed the Cummins Amendment.

We are impressed that appellee depends on a construction of the proviso which is too narrow and technical to reach its full meaning. In Adams Express Co. v. Croninger, 226 U. S. 491, 33 S. Ct. 148, 57 L. Ed. 314, 44 L. R. A. (N. S.) 257, construing the Car-mack Amendment to the Hepburn Act (49 USCA § 20), which fixed liability for damages on initial carriers, it was held that theretofore liability was determined by the general common law as declared by the Supreme Court and enforced in the federal courts,, and by state policies and statutes, and that no uniformity of obligation or liability was possible until Congress dealt with the subject. There were other constructions of that amendment, which were reviewed in Pierce Co. v. Wells, Fargo & Co. (Feb. 23, 1915) 236 U. S. 278, 35 S. Ct. 351, 59 L. Ed. 576.

The Cummins Amendment was soon adopted with uniformity in view respecting liability upon contracts for interstate shipments, and declared unnecessary notice or filing of claims in negligence cases. We think the language used is not ambiguous, when considered in the light of this manifest purpose. It was doubtless intended to be complete, as a regulation of all matters pertaining to claims based on negligence. ■ No room appears to have been left for a stipulation requiring written notice of injury, upon the theory of a distinction between that phrase and notice of a claim. The letter -of the law would thus be made the basis of construction rather than its object. A notice of injury would serve no other purpose than to apprise the carrier of a claim for damages. It is obvious that, if a carrier is not entitled to notice of a claim, it is not entitled to notice of an injury, which has a claim as its object. As the reason for both is the same, they are therefore practically synonymous in meaning. And as was said in Barrett v. Van Pelt, 268 U. S. 85, 45 S. Ct. 437, 69 L. Ed. 857, it may reasonably be thought that, where the ground of suit is negligence, the carrier has knowledge of the facts or expects a claim to be made for compensation. In our opinion, the proviso in question was intended to prohibit a notice of injury as a defense.

This view is in aeeord with the uniform decisions of the state courts, which construe the amendment. Missouri Pac. Ry. Co. v. Martindale, 139 Ark. 143, 213 S. W. 777; Hunt v. Hines, 204 Mo. App. 318, 223 S. W. 798; Wichita Valley Ry. Co. v. Baldwin (Tex. Civ. App.) 270 S. W. 1089; Ingram v. Davis, 134 S. C. 93,131 S. E. 677; Southern R. Co. v. Atlantic I. & C. Co., 40 Ga. App. 103, 149 S. E. 71; Hicklin v. Central of Ga. R. Co., 40 Ga. App. 297, 149 S. E. 286, 428; Hill v. Great Northern R. Co., 156 Wash. 567, 287 P. 665; Forkner v. L. & N. R. Co., 232 Ky. 579, 24 S.W.(2d) 290.

Our conclusion is that it was error to sustain the demurrer to appellants’ complaint and render judgment thereon. The order and judgment are therefore reversed, with direction to require an answer from the appellee.

Reversed.


author: GIBSON, District Judge.

text:
    DONNAN et al. v. HEINER, Collector of Internal Revenue.
    District Court, W. D. Pennsylvania.
    April 8, 1931
    William G. Heiner, of Pittsburgh, Pa. for plaintiffs.
    Louis E. Graham, U. S. Atty., and John A. McCann, Sp. Asst. Atty., both of Pittsburgh, Pa., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and W. T. Sabine, Jr., Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for defendant.
   GIBSON, District Judge.

This matter comes before us upon defendant’s statutory demurrer to plaintiffs’ statement. The facts disclosed by the statement are substantially as follows:

John W. Donnan died at Washington, Pa., on December 23, 1928. The present plaintiffs, executors of his estate, made a return for estate tax purposes on December 19, 1929, which showed a net taxable estate of $1,173,987.21, and a tax due of $62,578.98. Credit was claimed thereon of 80 per cent, paid to the state of Pennsylvania in the amount of $50,063.10, and the balance, $12,-515.80, was paid to the United States. Upon examination of the return, the Commissioner increased the amount of the gross estate by adding three certain items which had been omitted by the executors in their return: Hirst, a note in the amount of $5,000 dated October 3, 1923, representing an advancement to Sydney B. Donnan, ,a son of the ’decedent; second, a note in the amount of $32,500, dated September 15, 1927, representing an advancement to Alvan E. Donnan, another son of the decedent; and, third, a trust fund created by deed of trust dated Mareh 1, 1927, whereby the decedent transferred assets valued by the executors at $1,-700,000 to trustees, who were to pay the life income therefrom to the four children of the decedent and to distribute the same twenty years after the death of the last survivor. In his addition to the gross estate, the commissioner placed a value upon the trust property of $2,200,885.26. No question arises in the instant matter in respect to the propriety of the commissioner’s increase in the value of the trust fund. The additions to the gross estate resulted in an increase of liability for estate tax of $226,067.31. Against this amount an 80 per cent, credit for payment made to the state of Pennsylvania was allowed in the amount of $180,853.85. Plaintiffs subsequently paid the difference of $47,-733.87 to the defendant on February 17,1931, and on February 24th following filed a claim for refund, which was denied on March 6, 1931. Thereupon the instant action was instituted on March 11, 1931.

The statement of claim asserts that the advancements to his sons, evidenced by notes aggregating $37,500, and the amount of the trust fund, represented complete and irrevocable gifts to his children which were made during the lifetime of the decedent, and were not made in contemplation of death. Consequently, the inclusion of such gifts by the Commissioner in the gross estate of the decedent for purposes of estate tax was illegal. Plaintiffs seek to recover the amount of tax paid to the defendant by reason of the alleged wrongful increase of the decedent’s gross estate. To the statement of claim the defendant has filed a statutory demurrer wherein he asserts, in substance, that plaintiffs’ statement is insufficient in law, in that section 302(c) of the Revenue Act as amended in 1926 (26 USCA § 1094(e) makes said advancements and trust fund taxable, irrespective of whether or not the advancements were made, or the trust fund executed, in contemplation of death.

Section 302(e) of the Revenue Act as amended in 1926 (26 USCA § 1094(e), is as follows: “To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in ease of a bona fide sale for an adequate and full consideration in money or money’s worth. Where within two years pri- or to his death but after the enactment of this Act, and without such a consideration the decedent has made a transfer or transfers, by trust or otherwise, of any of his property, or an interest therein, not admitted or shown to have been made in contemplation of or intended to take effect in possession or enjoyment at or after his death, and the value or aggregate value, at the time of such death, of the property or interest so transferred to any one person is in excess of $5,000, then, to the extent of such excess, such transfer or transfers shall be deemed and held to have been made in contemplation of death within the meaning of this title. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death but prior to the enactment of this Act, without such consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title.”

The section quoted, if constitutional, fully sustains the defendant in his demurrer. Its constitutionality, however, is attacked by the plaintiffs, who assert that it seeks to deprive plaintiffs of their property without due process of law, in violation of the Fifth Amendment to the Constitution, in that it seeks to establish a conclusive statutory presumption which is contrary to the actual- fact.

The present matter seems to be' ruled by Schlesinger v. Wisconsin, 270 U. S. 230, 46 S. Ct. 260, 70 L. Ed. 557, 43 A. L. R. 1224. In that case the Supreme Court had under consideration a state tax statute which contained a provision very similar to that set forth in the second sentence of section 302(c) of the Act of 1926 (26 USCA § 1094(c). The only point of difference was one of degree, in that the Wisconsin act of 1919 (St. Wis. 1919, § 1087 — 1, subd. 3), provided that every transfer made within six years prior to death, of a material part of - his estate, shall be construed to have been made by the grantor in contemplation of death, whereas the act of 1926 fixes a two-year period. The Supreme Court decided that the conclusive presumption of the statute created an arbitrary classification and was in violation of the Fourteenth Amendment. As to the variation of time, it may be possible that the Supreme Court based its finding solely upon the great length of time, six years, in which the presumption was in effect. If so, the fact does not appear in the opinion. In argument,- counsel for the defendant commented upon the fact that the Fourteenth Amendment was under consideration by the Supreme Court in Sehlesinger v. Wisconsin, while in the present case the statute is alleged to violate the Fifth Amendment. It has been held in numerous cases that “equal protection of the laws” of the Fourteenth Amendment is the equivalent of “due process of law” of the Fifth Amendment. We feel, therefore, that no extended consideration need be given the alleged distinction. The Sehlesinger Case was affirmed by the Supreme Court in Uihlein v. Wisconsin, 273 U. S. 642, 47 S. Ct. 110, 71 L. Ed. 818.

Judgment will be entered for the plaintiffs upon the affidavit of defense raising questions of law.


author: MORTON, District Judge.

text:
    HALL et al. v. WHITE, Internal Revenue Collector.
    No. 4595.
    District Court, D. Massachusetts.
    April 6, 1931.
    Charles O. Pengra, John H. Sherburne, Jr., and Choate, Hall & Stewart, all of Boston, Mass., for plaintiffs.
    Frederick H. Tarr, U. S. Atty., and J. Duke Smith, Sp. Asst. U. S. Atty., both of Boston, Mass., for defendant.
   MORTON, District Judge.

The facts are stated in the declaration and need not be repeated. The gifts in question were a wedding present from Mr. Choate to' one of his daughters and an equal amount given at the same time to the other daughter. He died within two years after-wards. The statute applies; and the only question is whether its provisions are constitutional.

The gifts were taxed, as part of Mr. Choate’s estate because made in contemplation of death. In fact, they were not so made at all. The contemplation of death was conclusively attributed to him by the taxing department only because of the provisions of the statute.

In my opinion, the case is controlled by Schlesinger et al., Executors v. Wisconsin, 270 U. S. 230, 46 S. Ct. 260, 70 L. Ed. 557, 43 A. L. R. 1224. The only distinction between that ease and this one is th^tt there the statutory period was six years, while here it is two years. As I understand the majority of opinion, this difference is not significant, the principle being that it is arbitrary and unreasonable to tax a person or an estate on a state of facts which do not exist and which the person taxed is not permitted to show do not exist. “Mere legislative fiat may not take the place of fact in the determination of issues involving life, liberty or property." Butler J. Manley v. Georgia, 279 U. S. 1, 6, 49 S. Ct. 215, 217, 73 L. Ed. 575.

Demurrer overruled.