author: MARTIN, Chief Justice.

text:
    UNITED STATES ex rel. DELAWARE & HUDSON R. CORPORATION v. INTERSTATE COMMERCE COMMISSION (two cases).
    Nos. 5388, 5389.
    Court of Appeals of District of Columbia.
    Argued June 4, 1931.
    Decided June 29, 1931.
    H. T. Newcomb and Chas. E. Hughes, Jr., both of New York City, and Robert E. Quirk, of Washington, D. C., for appellant.
    Daniel W. Knowlton and Nelson Thomas, both of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and HITZ and GRONER, Associate Justices.
   MARTIN, Chief Justice.

The relator, the Delaware & Hudson Railroad Corporation, is a common carrier by railroad engaged in interstate commerce. The respondent is the Interstate Commerce Commission. The instant appeals .are from orders of the Supreme Court of the District of Columbia dismissing petitions of relator praying in the alternative for a writ of certiorari, mandamus, or prohibition, requiring the commission to take certain action in a reparation proceeding pending before it, in which relator was a party.

The appeals involve the same questions of law based upon similar facts, and have been submitted together. For convenience, this opinion will deal with case No. 53'89.

In that ease, the Eastern Equities Corporation and the American Glue Company, Inc., filed a petition with the commission against the Boston & Maine Railroad and twenty-five other interstate railroads including relator, alleging that certain rates, charged by them upon shipments of glue stock to Philadelphia and Springdale, were unjust and unreasonable, and therefore in violation of section 1 of the Interstate Com-meree Act (49 USCA § 1), and that complainants had been damaged thereby to the extent that the rates which they had paid exceeded just and reasonable rates. The petition named twenty-three scattered points of origin of such shipments to Springdale and eleven such points of origin to Philadelphia. The petitioners prayed for an investigation and an award of damages under the Interstate Commerce Act.

Relator thereupon filed a motion with the commission, wherein it alleged that its rail-, road had participated in certain shipments charged in the complaint, but was in no way involved as to seventeen of the twenty-three points of origin of shipments to Springdale, nor as to seven of the eleven to Philadelphia; that no part of the transportations from those points to the respective destinations had ever been or ever could be over relator’s railroad; that relator was not a party to and had not participated in any rates applied to such points; that the complaint was therefore irregular and illegal inasmuch as it joined parties who had no common interest in many of the subjects of complaint. The relator accordingly moved the commission for a “severance of the complaints” in order, that relator might have the reasonableness of the rates in which it participated determined by the commission, without reference to other rates in which it had not participated. This motion was denied by the commission, and the hearing of the ease was postponed to a date thereafter to be fixed. The record does not disclose that such a hearing has yet taken place.

Relator thereupon filed a petition in the Supreme Court of the District of Columbia, complaining of the commission’s refusal to grant the severance sought in relator’s motion, and praying that either by means of a' writ of certiorari,, mandamus, or prohibition, the court should require the commission “to sever the complaints against relator and to hear and determine said complaints separately from complaints against -other carriers to which relator has no relation.”

The relator sets out as follows the injury which it apprehends in case of a denial of such severance: “Said unlawful proceedings, as aforesaid, greatly injure, prejudice, harass and annoy the relator. It is advised by its counsel and verily believes that they would subject relator to the risk of having the questions of the reasonableness of its rates and its liability for damages determined upon evidence not material, relevant or competent upon the complaint made against it; would compel it to incur unreasonable expenditures of time and money in attending hearings before the commission with respect to complaints against other carriers in which it has no proper concern whatever; and, if an order for damages were made as a result of such hearing, would permit the complainants therein to bring suit against relator to recover the damages awarded against it in any court in which such a suit might be maintained against any of the carriers against which an award for damages was contained in such order.”

The Supreme Court of the District held against relator’s contention and dismissed its petition, whereupon this appeal was taken.

It may be conceded that the procedure pursued before the commission in this case does not conform to the rules adopted by courts of law. However, the commission is an administrative body and its proceedings under sections 13 and 16 of the Interstate Commerce Act (49 USCA §§ 13,16) are administrative and not judicial in character. The commission therefore is not hampered in such proceedings by the hard and fast rules as to pleading and practice which prevail in courts of law. Moreover, it is provided by the Interstate Commerce Act § 13 (49 USCA § 13), that in such eases “it shall be the duty of the Commission to investigate the matters complained of in such manner and by such means as it shall deem proper.” And in section 17 of the Act (49 USCA § 17), it is enacted that, “The commission may conduct its proceedings in such manner as will best conduce to the proper dispatch of business and to the ends of justice.”

In Spiller v. A., T. & S. F. Ry. Co., 253 U. S. 117, 40 S. Ct. 466, 470, 64 L. Ed. 810, Mr. Justice Pitney, speaking for the Supreme Court of the United States concerning the effect of section 16 of the Act, said:

“The same section contemplates that numerous parties may unite in a claim for reparation, and that numerous carriers may be joined as defendants; and similarly that in a suit brought upon such award there may be a joinder of parties plaintiff and defendant. And, by section 17 (24 Stat. 385; 25 Stat. 861), 'the commission may conduct its proceedings in such manner as will best conduce to the proper dispatch of business and to the ends of justice.’
“These provisions allow a large degree of latitude in the investigation of claims for reparation, and the resulting findings and order of the commission may not be rejected as evidence because of any errors in its procedure not amounting to a denial of the right to a fair hearing, so long as the essential facts found are based upon substantial evidence. * * *«

We are satisfied that the alleged misjoinder of parties and causes of which relator complains is not such error as would authorize the interference of a court in the commission’s proceedings.

Moreover, we are of the opinion that this record discloses no such grounds as would in any event justify the granting of a writ of certiorari, mandamus, or prohibition.

As to certiorari, it was said by this court in Detroit & T. S. L. R. Co. v. I. C. C., 51 App. D. C. 133, 277 F. 535, 537: “The Interstate Commerce Commission is an administrative body. Interstate Commerce Commission v. Brimson, 154 U. S. 447, 14 S. Ct. 1125, 38 L. Ed. 1047. Recently we had occasion to consider whether or not a writ of certiorari would issue to an administrative officer for the purpose of reviewing his decision in a matter over which he had jurisdiction, and we held, following a decision of this court (Degge v. Hitchcock, 35 App. D. C. 218), affirmed by the Supreme Court of the United States (229 U. S. 162, 33 S. Ct. 639, 57 L. Ed. 1135), that it would not. Mickadiet v. Payne, 269 F. 194, 50 App. D. C. 115.”

In respect to mandamus, it is settled that the writ will not lie to compel the Interstate Commerce Commission to set aside a decision upon a matter within its jurisdiction, and to decide the matter in another specified way. Nor can the writ be made to serve the purpose of an appeal or writ of error. Interstate Commerce Commission v. Waste Merchants’ Ass’n, 260 U. S. 32, 43 S. Ct. 6, 67 L. Ed. 112; U. S. ex rel. Abilene & S. Ry. Co. v. I. C. C., 56 App. D. C. 40, 8 F.(2d) 901; U. S. ex rel. Cripple Creek, etc., R. Co. v. I. C. C., 56 App. D. C. 168, 11 F.(2d) 554.

“Prohibition is, in a sense,, the counterpart of mandamus, in that it prevents, while mandamus compels, action.” 50 C. J. 565. “Prohibition does not lie to correct or restrict errors or irregularities of a tribunal which is acting within its jurisdiction, although proceeding improperly in the exercise of that jurisdiction. The remedy cannot be used to supersede the ordinary functions of an appeal or writ of error, except as it may be permitted by statute.” 50 C. J. 676.

It may be added that in the instant ease the benefit of these writs is sought by the relator before the commission has made a finding upon the substantive issue before it, and consequently before relator has actually suffered an adverse finding upon the merits. The action is therefore premature. United States ex rel. Western Union Telegraph Co. v. Interstate Commerce Commission, 51 App. D. C. 334, 279 F. 316.

In both eases, therefore, to wit Nos. 5388 and 5389, the judgment of the lower court is affirmed, with costs.


source: Caselaw Access Project

license: Public Domain

text:
    MELLON, Secretary of the Treasury, et al. v. JONES et al.
    No. 5154.
    Court of Appeals of District of Columbia.
    Argued June 2, 1931.
    Decided June 29, 1931.

      L. A. Rover, J. W. Fihelly, and W. A. Gallagher, all of Washington, D. C., for appellants.
    H. J. Gerrity, of Washington, D. C., for appellees.
    Before MARTIN, Chief Justice, and HITZ and GRONER, Associate Justices.
   MARTIN, Chief Justice.

Appeal from a decree entered upon bill and answer, appointing a receiver to collect from the United States Treasury certain funds held to the credit of Stanislaus P. de Ridder, as an award under the Settlement of War Claims Act of 1928 (45 Stat. 254), and ordering payment of 29 per cent, thereof when received to appellees as attorneys for de Ridder for their services in securing the award.

The bill of complaint filed below by appel-lees, hereinafter called the plaintiffs, alleged that de Ridder, hereinafter called the claimant, is a citizen of the United States and a resident of Kentucky; that he asserted a claim against Germany for damages resulting from the destruction by submarine of the American schooner Jacob M. Haskell in which he owned a certain interest; that on December 4, 1922, the claimant authorized plaintiffs as his attorneys to prosecute his claim before the Mixed Claims Commission, and they accepted the employment under an agreement whereby claimant was to pay for such services only in event an award was made in his favor and payment thereof secured; that afterwards an award in the sum of $8,488.28 was secured for claimant through the efforts of plaintiffs as his attorneys, and this amount was duly certified to the Secretary of the Treasury and is payable to claimant; that upon application of claimant the American Commissioner of the Mixed Claims Commission, acting under section 9 of the Settlement of War Claims Act, fixed as a reasonable fee to be paid by claimant to plaintiffs “an amount equal to twenty per cent of the amount” received by him in payment of the award; that claimant, nevertheless, is now about to file an application for payment to him of the full amount of the award independently of plaintiffs, in order to deprive plaintiffs of “their lien” upon said warrant and to remove the funds from the jurisdiction of this court, “and make onerous and uncertain” the enforcement of plaintiffs’ rights against claimant; that the funds for the payment of the award have been made available by law, and the Secretary of the Treasury has been authorized and directed to perform the ministerial duty of paying the same, and unless prevented by the order of this court will draw a warrant on the Treasury payable to claimant’s order, and as a result the funds will leave the jurisdiction of this court and go into the hands of claimant, and plaintiffs will thereby lose “their equitable lien upon the cheek or warrant in payment of said award and will suffer irreparable loss and damage.” The prayer of the bill was for the appointment of a receiver to collect the amount of the award from the Secretary of the Treasury and the Treasurer of the United States, and pay the counsel fees therefrom, and for general relief.

A subpoena was issued for the defendants, and was returned “not to be found” as to de Ridder, but served upon the other persons named. An affidavit as to the nonresidence of de Ridder was filed by plaintiffs, and an order of publication was issued, publication was made, and proof thereof filed. No other service upon de Ridder was ever made, nor did he enter his appearance in any manner in the case.

A motion to dismiss the bill of complaint was filed by the Secretary of the Treasury and the Treasurer upon the ground that the court had no jurisdiction over the subject-matter of the bill, and for other grounds stated therein. The motion was overruled, and an answer was filed by them alleging that they could not lawfully pay the award to a receiver or to any person except de Ridder as the individual named in the award.

The lower court then entered a ^‘decree pro confess©” against de Ridder, describing him as a nonresident of the District of Columbia, having been duly served by publication, and having failed to cause his appearance to be entered in the case, and decreed that the averments of the bill should be taken as confessed by him. The court thereupon entered a final decree appointing a receiver and directing him forthwith to file an application with the Secretary of the Treasury for the immediate payment to him of the amount of the award, and that upon the payment thereof the receiver should pay over to the plaintiffs an amount equal to 29 per cent, of the amount received from the Treasury Department. Whereupon the present appeal was taken by the Secretary of the Treasury and the Treasurer of the United States.

We think the decree of the lower court is erroneous.

The bill of complaint utterly fails to allege any agreement between the client and the attorneys that the latter should have a lien for their fees upon the award secured by their services, nor is it alleged that the fees were to be, paid out of such proceeds. The bill does not disclose whether the contract of employment was in writing or parol, but simply states that the attorneys undertook the prosecution of the claim under an agreement whereby the client was to pay for their services only in event an award by the Mixed Claims Commission was made in his favor and payment thereof secured.' This does not state facts sufficient to entitle the attorneys to a lien for their fees upon the funds recovered while in the possession of the Treasury, nor did such a lien result from the action of the American Commissioner in fixing the amount of the fees, nor is there any provision in the Settlement of War Claims Act of 1928 which creates or establishes such a lien.

In Wright v. Ellison, 1 Wall. 16, 17 L. Ed. 555, a case arising in the District of Columbia relating to a claim by an attorney in fact for a lien for his compensation upon an award secured by his services, it was held by the Supreme Court of the United States that to constitute an equitable lien on a fund there must be some distinct appropriation of the fund by the debtor; that it is not enough that the fund may have been created through the efforts and outlays of the party claiming the lien. See Christmas v. Russell, 14 Wall. 69, 20 L. Ed. 762; Dillon v. Barnard, 21 Wall. 430, 22 L. Ed. 673; Peugh v. Porter, 112 U. S. 737, 741, 5 S. Ct. 361, 28 L. Ed. 859.

In Trist v. Child, 21 Wall. 441, 447, 22 L. Ed. 623, it was said by the court: “It-is well settled that an order to pay a debt out of a particular fund belonging to the debtor gives to the creditor a specific equitable lien upon the fund, and binds it in the hands of the drawee. A part of the particular fund may be assigned by an order, and the payee may enforce payment of the amount against the drawee. But a mere agreement to pay out of such fund is not sufficient. Something more is necessary. There must be an appropriation of the fund pro tanto, either by giving an order or by transferring it otherwise in such a manner that the holder is authorized to pay the amount directly to the creditor without the further intervention of the debt- or.”

In Porter v. White, 127 U. S. 235, 8 S. Ct. 1217, 32 L. Ed. 112, it was held by the court on the facts, that the plaintiff in a suit in equity had not established his right to a decree that he was entitled to the one-half of the attorney’s fees in an award against Mexico by the joint United States and Mexican commission, which fees had been collected by the defendant, for the reason that the plaintiff had failed to establish any equitable lien on the fund by showing any distinct appropriation of a part of it in his favor, or any agreement that he should be paid out of it. Citing Wright v. Ellison, supra; Trist v. Child, supra; Peugh v. Porter, supra.

In Nutt v. Knut, 200 U. S. 13, 26 S. Ct. 216, 219, 50 L. Ed. 348, relating to a contract whereby an attorney was to receive for his services, “a sum equal to 33Yb per cent of the amount allowed on the claim,” the court said, “Such an agreement did not give the attorney any interest or share in the claim itself, nor any interest in-the particular money paid over to the claimant by the government. It only established an agreed basis for any settlement that might be made, after the allowance and payment of the claim, as to the attorney’s compensation.”

See De Winter v. Thomas, 34 App. D. C. 80, 27 L. R. A. (N. S.) 634; Taylor v. Wharton, 43 App. D. C. 104; Lindberg v. Humphrey, 53 App. D. C. 243, 289 F. 901.

The instant case is unlike Houston v. Ormes, 252 U. S. 469, 40 S. Ct. 369; 64 L. Ed. 667, and Mellon v. Orinoco Iron Company, 266 U. S. 121, 45 S. Ct. 53, 69 L. Ed. 199, cited by appellees, inasmuch as in those eases the owner of the fund in question personally appeared in the ease, whereas de Ridder did not so appear here.

In the present case, it may be repeated, the appellants did not claim that their contract of employment specified the amount to be paid for their services, nor that it was to be secured by a lien upon the award, nor that the fees were to be paid out of the funds so recovered. It follows that the funds now held for claimant in the United States Treas • ury are not subject to a lien in behalf of Ms attorneys. It is also the law that “The debts due from the government of the United States have no locality at the seat of government.” Vaughan v. Northup, 15 Pet. 1, 6, 10 L. Ed. 639; Wyman, Treas. v. Halstead, 109 U. S. 654, 3 S. Ct. 417, 27 L. Ed. 1068; U. S. v. Borcherling, 185 U. S. 223, 22 S. Ct. 607. 46 L. Ed. 884. “If there was no lien, there was no' jurisdiction in equity.” Trist v. Child, supra; Lindberg v. Humphrey, supra. The attempt to secure jurisdiction over de Ridder by publication was therefore erroneous; the court obtained no jurisdiction over him, and the order appointing a receiver and for a distribution of the fund is void.

The decree appealed from is reversed, and the cause is remanded to the lower court, with directions to dismiss the bill of complaint.


author: HITZ, Associate Justice.

text:
    JOHNSON LOCKE MERCANTILE CO. v. BURNET, Com’r of Internal Revenue.
    No. 5136.
    Court of Appeals of District of Columbia.
    Argued June 1, 1931.
    Decided June 29, 1931.
    G. E. H. Goodner, of Washington, D. C., for appellant.
    Sewall Key, C. M. Charest, J. S. Franklin, and F. E. Mitchell, all of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and HITZ and GRONER, Associate Justices.
   HITZ, Associate Justice.

This is an appeal from an order of rede-termination of the Board of Tax Appeals, pursuant to sections 1001, 1002, and-1003 of the Revenue Act of 1926, e. 27, 44 Stat. 9, 109, 110 (26 USCA §§ 1225, 1226, and § 1224 and note).

It involves corporation income and profits taxes for the year 1921 and 1922, and, more particularly, the question whether certain items claimed by appellant to be accrued interest were properly disallowed as deductions from gross income.

Petitioner, a California corporation, with its principal offices in San Francisco, on March 27, 1915, entered into an agreement with its creditors and a trustee, whereby practically all of its stock was transferred to the trustee, who was to pay the creditors on account of their respective debts aggregating $924,350.36.

Thereby petitioner obtained an extension of five years for the payment of the obligations, and all claims for interest due or to become due were waived so long as the contract was kept.

On January 3, 1921, the obligations still being unpaid, a new agreement was entered into, extending for three years the period for payment and providing that, if in that time an amount were paid which added to the payments made under the former agreement, should total 45 per cent, of $924,350.36, the debts would be considered paid in full and discharged.

This agreement further provided that all sums theretofore and thereafter paid should be considered as payments on account of the interest on the obligations and not on account of principal.

By June 15, 1922, the creditors had received under the two agreements 45 per cent, of $924,350.36, without interest, and the obligations were thereby discharged.

Petitioner contends that since by contract the payments were called interest, and were so treated by the parties, it is entitled to deduct' from its gross income for 1921, 7 per cent, of $924,350.36; and for 1922, interest on the same sum from January 1 to June 15, at the same rate, being the legal rate in California.

These deductions are claimed under section 234, Revenue Act of 1921, c. 136, 42 Stat. 227, 254:

“(a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: * * *
“(2) All interest paid or accrued within the taxable year on its indebtedness. * * * ”

The Commissioner and Board of Tax Appeals in effect held that calling the payments interest did not make them interest, and that they were actually payments on the principal sums due and in discharge thereof.

With these findings we agree.

As said by Mr. Klein on page 451 of his work on Federal Income Taxation, “if what is termed ‘interest’ by the parties is really part and parcel of the debt, the item cannot be deducted.”

Moneys paid under the 1915 contract were not to have been treated as interest until the contract of 1921, wherein the principal was considered as unchanged by their payment, but it was provided that they should form part of the settlement sum.

Reduced to its bones, the agreement of 1921 was a contingent settlement with creditors at 45 cents on the dollar, with a credit thereon for moneys paid under the 1915 agreement.

While the payments under the agreement were designated “interest,” there was no provision for the payment of interest in the usual acceptation of the term unless the contingency should not arise, through failure to make payments totaling 45 per cent.

But the contingency did arise and the settlement was completed by payment of 45 per cent in less than a year and a half, from which it is evident that the officers of the corporation should have known before deduction of interest for 1921 that nothing but the 45 per cent, would in fact be paid.

“A contingent liability per se cannot justify a current deduction; a liability must have become absolute before it can result in a deductible expense.” Klein, Federal Income Taxation, 1930 Supplement, page 57, Par. 15:7.

The question of interest was voluntarily left in abeyance for some three years, with experience suggesting that it would probably not be paid, and a deduction claimed for one year when this probability was strengthened, and for another year or part thereof, when the probability had become a certainty.

The amount paid by petitioner to its creditors was not interest, and the petitioner was not entitled to deduction for interest, either accrued or paid.

The decision of the Board of Tax Appeals is affirmed.

Affirmed.


text:
    G. G. LOEHLER CONST. CO., Inc., v. AUTH et al.
    No. 5129.
    Court of Appeals of District of Columbia.
    Submitted May 6, 1931.
    Decided June 29, 1931.

      Alfred Cereeo, Francis G. Matson and Alfons B. Landa, all of Washington, D. C., for appellant.
    Leon Tobriner, Byron Graham, Walter N. Tobriner, and J. H. Boxtater, all of Washington, D. C., for appellees.
    Before MARTIN, Chief Justice, and ROBB, HITZ, and GRONER, Associate Justices.
   HITZ, Associate Justice.

This is an appeal from a final decree of the Supreme Court of the District of Columbia dismissing a bill in equity on motion.

The bill, as filed by plaintiff (appellant), a Delaware corporation, contained eight paragraphs and seven prayers.

The first three paragraphs allege the organization of plaintiff corporation in Delaware, its doing business in the District of Columbia, and the United States citizenship and District Of Columbia residence of the defendants.

The fourth paragraph alleges subscription by, and delivery to, defendant Henry J. Auth of 1,000 shares of stock in plaintiff company of the par value of $10 each; its acceptance by him; his failure and refusal to pay for it, though requested; receipt of no consideration by the company for the sale; Henry J. Auth’s consequent indebted-, ness to it of $10,000; and that he is treasurer of the company.

The fifth paragraph makes the same allegations as to the other defendant, except that his purchase is alleged to have been 500 shares, his indebtedness $5,000, and his position vice president of the company.

The sixth paragraph alleges conveyance in March, 1928, to defendants of the Appeals Building, in Washington, D. C., in escrow; its value and incumbrances; demand for re-conveyance; refusal; collection and retention of the rents therefrom by defendants; and refusal to account therefor.

The seventh paragraph alleges that Henry J. Auth illegally and in violation of the Code retained $5,000, and John N. Auth $3,000, as bonuses and commissions on loans and advances made the company.

The eighth paragraph alleges that defendants sought to and did injure the credit of the company by statements that they would go into bankruptcy, to the damage of the company of $250,000, and demands a decree for that amount.

The first three prayers ask for process, discovery, and the payment of his stock subscription by each defendant.

The fourth prayer is for temporary and permanent injunctive relief against conveying or incumbraneing the Appeals Building, and for its reconveyance to the plaintiff.

The fifth and sixth prayers ask for return by defendants of the bonuses and commissions on the loans; all unlawful retentions of money; and for an accounting; while the seventh asks general relief.

Defendants’ separate motions to dismiss the bill are identical except as to their names, and offer, in substance, four grounds for such action:

1. Failure to state a case for the relief sought as to the matters contained in the bill.

2. Plaintiff has a plain and. adequate remedy at law.

3. Misjoinder of parties and causes of action.

4. Failure to allege any written declaration of trust, or written agreement as to the real estate, required by section 1118, D. C. Code (section 3, tit. 11, D. C. Code 1929).

The three assignments of error are:

1. The bill stated a cause of action entitling plaintiff to the relief sought.

2. The bill, though multifarious, was still within the rules which permit more than one cause of action in equity to be stated in the same bill.

3. The bill was 'good because it stated facts establishing a resulting trust in favor of plaintiff.

The Supreme Court in Gaines v. Chew, 2 How. (43 U. S.) 619, 642, 11 L. Ed. 402, said: “In general terms a bill is said to be multifarious, which seeks to enforce against different individuals, demands which aate wholly disconnected.”

The claims against the two defendants for the purchase money of stock, for the bonuses and commissions, and for the alleged actionable utterances, were wholly disconnected demands against two different individuals, though some of the demands might have been joined against each of these defendants, under the rules of the trial court.

But they were all claims as to which each defendant was entitled to trial by jury in a court of law. Tuckerman v. Mearns, 49 App. D. C. 153, 262 F. 607.

Joined with them are allegations in the fifth paragraph concerning the unlawful retention of real property, which are intended to obtain discovery, injunctive relief, specific performance, and accounting, all cognizable only in equity.

While the rules of the trial court permit adding or dropping parties when required, and, under some circumstances, joinder of causes in which the same character of relief is sought, the bill in this ease does not fall within these rules.

And while a cause erroneously filed in equity can now be transferred to the law side of the court, and vice versa, Tuckerman v. Meams, supra, no relaxation of technical pleading justifies the joinder of causes some of which are cognizable only in equity with others cognizable only at law.

Where a demurrer is sustained for misjoinder and multifariousness, and the complainant does not cure the difficulty by amendment, it is proper to dismiss the bill. Story Eq. PL, § 284b; Dial v. Reynolds, 96 U. S. 341, 24 L. Ed. 644.

Since the reasons stated were sufficient for dismissal of the bill, discussion of the other assignments of error is unnecessary.

The decree is affirmed, with costs.

Affirmed.


text:
    RAILROAD SUPPLY CO. v. BURNET, Com'r of Internal Revenue.
    No. 5120.
    Court of Appeals of District of Columbia.
    Argued June 1, 1931.
    Decided June 29, 1931.
    Frank S. Bright, of Washington, D. C., for appellant.
    C. M. Charest, of Washington, D. C., G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, A. G. Divet, and J. Louis Monarch, all of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and HITZ and GRONER, Associate Justices.
   MARTIN, Chief Justice.

This proceeding involves income and excess profits taxes for the years 1918, 1919, and 1920. It calls for a review of an order of the Board of Tax Appeals sustaining a finding of the Commissioner of Internal Revenue, which denied special assessment to appellant under sections 327 and 328 of the Revenue Act of 1918 (40 Stat. 1057,1093).

Section 326 (a) of the aet*(40 Stat. 1092) provides in general for the methods of determining the “invested capital” of a corporation as intended by title 3, War-Profits and. Excess Profits Tax (40 Stat. 1088). In section 327 (d) provision is made for a special method of assessment under section 328, under the following circumstances, to wit: “Where upon application by the corporation the Commissioner finds and so declares of record that the tax if determined without benefit of this section would, owing to abnormal conditions affecting the capital or income of the corporation, work upon the corporation an exceptional hardship evidenced by gross disproportion between the tax computed without benefit of this section and the tax computed by reference to the representative corporations specified in section 328.”

The latter section, to wit, section 328, provides in such case for assessment by means of a comparison of the taxpayer’s tax with the average tax of representative corporations engaged in a like or similar trade or business for the taxable year. See Income Tax Regulations 45 (1920 Ed.).

In the instant ease the corporation applied to the Commissioner for a finding and declaration of record such as is provided for by section 327, and accordingly for a special assessment under section 328.

This was denied by the Commissioner, and the Board of Tax Appeals sustained his decision. The Board held that the corporation had no such abnormality in invested capital and income for the years in question as would entitle it to special assessment under the provisions of section 328, supra. This appeal was then taken.

It is settled law, however, that this court is without jurisdiction over such an appeal, there being no charge of fraud or other irregularity in the case.

In Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 48 S. Ct. 587, 590, 72 L. Ed. 985, a case arising in the Court of Claims and dealing with the statutes now in question, Mr. Justice Brandéis speaking for the court said: “Moreover, whatever jurisdiction is possessed by the Court of Claims to review determinations under sections 327 and 328, would be possessed also by the District Courts in suits against collectors and in actions against the United States, under section 24 (20) of the Judicial Code (28 USCA § 41 (20). Thus the determinations of the Commissioner in this delicate and complex phase of revenue 'administration would be subjected to review by a large number of courts, none of which have ready access to the information necessary to enable them to arrive at a proper conclusion in revising his .decisions; whose experience in passing upon questions of this character would be limited; and whose varying decisions would tend to defeat, rather than promote, that equality in the application of the revenue law which sections 327 and 328 were designed to ensure. We conclude that the determination whether the taxpayer is entitled to the special assessment was confided by Congress to the Commissioner, and could not, under the Revenue Act of 1918, be challenged in the courts —at least in the absence of fraud or other irregularities.”

The foregoing decision has been recognized as settling the rule, both for original actions in the courts and appeals from the Board of Tax Appeals, that the Commissioner’s discretion exercised in such cases cannot be reviewed by the courts “in the absence of fraud or other irregularities.” Ennis Coal Co. v. United States (C. C. A. 4th) 37 F.(2d) 574; National Bank of Commerce v. United States (C. C. A. 9th) 39 F.(2d) 434.

In Cramer & King Co. v. Commissioner of Internal Revenue (C. C. A. 3d) 41 F.(2d) 24, 26, upon a petition to review a decision of the Board of Tax Appeals, in a case relating to special assessments under sections 327 and 328, supra, the court said: “Whether a taxpayer is entitled to a special assessment under these sections was confided ■ by the Congress to the discretion of the Commissioner, and that discretion may not be reviewed by the eourts, in the absence of fraud or other irregularities.”

In Duquesne Steel Foundry Co. v. Commissioner of Internal Revenue, 41 F.(2d) 995, and in Enameled Metals Co. v. Commissioner of Internal Revenue, 42 F.(2d) 213, the Circuit Court of Appeals of the Third Circuit held to the same effect, citing Cramer & King Co. v. Commissioner of Internal Revenue, supra.

The two eases last cited were reviewed by the Supreme Court by certiorari, and on-April 27, 1931, both were affirmed upon authority of Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 48 S. Ct. 587, 72 L. Ed. 985, above referred to.

See also Kekaha Sugar Company, Limited, v. David Burnet, Commissioner of Internal Revenue, 50 F.(2d) 322, decided by this court May 4, 1931.

We accordingly deny the order sought by appellant, and dismiss its petition.

Appeal dismissed.


text:
    FIDELITY STORAGE CO. v. FOSTER.
    No. 5107.
    Court of Appeals of District of Columbia.
    Argued May 5, 1931.
    Decided June 29, 1931.
    M. M. Doyle and F. A. Thuee, both of Washington, D. C., for plaintiff in error.
    May Thorpe Bigelow, of Washington, D. C., for defendant in error.
    Before MARTIN,- Chief Justice, and ROBB, VAN ORSDEL, HITZ, and KRONER, Associate Justices.
   HITZ, Associate Justice.

This case comes here by writ of error to the municipal court of the District of Columbia to review a judgment for the plaintiff below, defendant in error, in the sum of $410, with interest and costs.

The particulars of demand claimed $460, as the value of money and jewelry stolen from plaintiff’s apartment in the Monmouth Hotel, as the result of defendant’s alleged negligence in its custody of a duplicate key which it held as manager of the building.

The assignments of error dispute the finding of negligence by the trial court in support of its judgment; the application of the law of bailments to the controversy; and also present certain questions on the evidence as to the value of the articles stolen.

Plaintiff had for a long time prior to February 19, 1929, occupied an apartment on the eighth floor of the Monmouth Hotel, to which there were three keys, one of which was retained by the management for mutual convenience.

This key was, when not in use, kept with those of other tenants on a large wire ring on a nail under the counter of the office in the lobby.

On the day mentioned, plaintiff left her apartment about one o’clock, and, when she returned after four o’clock, found her door ajar, her dresser drawer open, its contents on the floor, and her jewelry box gone, which contained $130 in money, an antique brooch, a diamond pin, and a gold wedding ring, which jewelry had been the property of her deceased mother.

The key of her apartment that was kept in the office was found on the second floor of the building and returned to the office.

The court, to which the ease was tried without a jury, found for the plaintiff as claimed, except that the value of the brooch was fixed as $75 instead of $125.

In reaching this judgment, the court found a mutual bailment of the office key, and with this finding we agree.

While ordinary care is all that is required in eases of mutual bailment, 6 C. J. 1121, the court below found the corresponding degree of negligence.

Ordinary care means that degree of care, attention, or exertion, which, under the actual circumstances, a man -of reasonable prudence and discretion would use in reference to the particular thing if it were his own property. 6 C. J. 1119; New York C. R. Co. v. Lockwood, 17 Wall. (84 U. S.) 383, 21 L. Ed. 627; Schermer v. Neurath, 54 Md. 497, 39 Am. Rep. 397.

The resident manager, as a witness for defendant, testified that she did not keep the key to her own apartment on the ring in the office because the employees knew she sometimes had as much as a thousand dollars in her apartment, and she did not want her key readily accessible to the employees because of the special temptation.

Nearly half that amount was stolen from plaintiff, who also had other things of value in her apartment.

This evidence of the manager tended to show one measure of care for the key of the owner of the building, or his representative, and a lesser measure of care for the keys of his tenants left in his custody, and, along with other evidence, fully justified the court in finding a lack of ordinary care in this bailment.

The questions of evidence presented by the record go to its weight rather than to its competency to prove the value of the lost jewelry.

This was antique jewelry, having no current market value, and plaintiff supplemented her testimony with opinion evidence of an expert witness.

The articles not having been recovered, this witness could testify only from a description of them and from a photograph of the plaintiff’s grandmother taken while wearing the brooch.

This testimony appears to have been the best available under the circumstances, and the court, sitting as a jury, had the right as well as the duty to exercise its own judgment after receiving it. 17 C. J. 908.

We find no error, and the judgment is affirmed with costs.

Affirmed.


author: SPARKS, Circuit Judge.

text:
    BERETH v. SPARKS.
    No. 4481.
    Circuit Court of Appeals, Seventh Circuit.
    July 8, 1931.
    Rehearing Denied Sept. 25, 1931.
    James D. Shaw and A. J. Whitcomb, both of Milwaukee, Wis., for appellant.
    M. G. Eberlein, of Shawano, Wis., for ap-pellee.
    Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.
   SPARKS, Circuit Judge.

Appellee brought this suit in equity to secure a direction to the appellant that a certain judgment, rendered by a state court of Wisconsin in her favor against appellant, be given priority in payment.

The court made a special finding of facts and rendered conclusions of law as follows:

“First: That the plaintiff on the 28th day of January, 1925, was the owner and in possession of a large stock of merchandise and fixtures located in a store building belonging to her at the City of -Crandon, Forest County, Wisconsin.
“Second: That on said date the sheriff of Forest County, Wisconsin, in an action commenced by the First National Bank of Cran-don, a National Banking Institution, in an action against James F. Sparks, caused the said merchandise and fixtures to be attached.
“Third: That on April 1, 1925, the above named plaintiff, Nannie Sparks, commenced an action of Replevin in the Circuit Court of Forest County against the sheriff of Forest County and the First National Bank of Cran-don to recover possession of the said stock of merchandise and fixtures, together with the damages for the unlawful taking and detention.
“Fourth: That the First National Bank of Crandon became insolvent on April 22, 1925, and Herbert Pearson was appointed by the Comptroller of Currency as Receiver for said bank and intervened in the said Replev-in action, filed an answer and defended the attachment of the said stock of merchandise and fixtures.
“Fifth: That the above named defendant James B. Bereth is the successor to the said Herbert Pearson, as Receiver of said Bank, and appeared upon the trial of the said Re-plevin action and joined with the sheriff of Forest County in making a defense thereto.
“Sixth: That the above named plaintiff, Nannie Sparks, prevailed in said action and on the 14th day of May, 1929, recovered a judgment in the Circuit Court of Forest County against James B. Bereth, as Receiver for the First National Bank o£ Crandon, because of said unlawful attachment, in the sum of $25,118.53, which judgment was affirmed by the Supreme Court of the State of Wisconsin.
“Seventh: That due demand has been made by the plaintiff upon the said James B. Bereth, as Receiver for the First National Bank of Crandon, for the payment of said judgment in full as an administration expense, and the said Receiver has refused to pay the same in full, denies that it is an administration expense, and offers to pay the said claim on the same basis as other general creditors of the First National Bank of Cran-don are being paid.
“Eighth: That there are sufficient funds undistributed in the hands of the Receiver to pay in full all administration expenses, including the said judgment, together with interest thereon, and costs of this action,
“Ninth: 'That the said judgment against James B. Bereth, as Receiver for said First National Bank of Crandon, is an administration expense. And I find as
“Conclusions of Law.
■ “First: That said judgment in the sum of $25,118.53 against James B. Bereth, as Receiver for the First National Bank of Cran-don, in favor of the above named plaintiff, Nannie Sparks, is an administration expense.
“Second: That as such administration expense the plaintiff is entitled to have the Comptroller -of the Currency and the Receiver in this action pay the said judgment in full and give it priority over the claims of the ordinary creditors.
“Third: That the plaintiff is entitled to a decree directing that in the distribution of the trust funds in the hands of James B. Bereth, as Receiver for the First National Bank of Crandon, the said judgment of the plaintiff, Nannie Sparks, be paid in full as an administration expense, together with the costs and disbursements of this action.”

Judgment was rendered accordingly, and this appeal is prosceuted from that judgment.

Appellant contends (1) that the judgment awarded by the circuit court of Forest county, Wisconsin, for the tort of the First National Bank, committed prior to the receivership, does not constitute an administration expense, and is to be paid only ratably with other claims; (2) that it is of no significance that the judgment of the state court is in form against the receiver, for, at his election, he might defend in the name of the bank or as its receiver, and in either case the judgment would merely fix the amount of the claim to be recognized by the receiver for pro rata payment; and (3) that the state court was without jurisdiction to enter a judgment against the receiver for the supposed tort of the receiver.

Each of these claims is based upon the assumption that the receiver, as such, was guilty of no wrong, and that the tort referred to was committed by the bank prior to the appointment of the receiver. The theory of the bill of complaint, however, is that the receiver ratified the tort of the bank and persisted in the defense of the bank’s position relative thereto, all to the detriment and damage of appellee, and that, by reason thereof, the receiver became a joint tort-feasor ah initio. The findings of the court proceed, and the conclusions of law are based upon this theory. There was at least substantial evidence adduced and facts found to warrant the-court in concluding that appellant was a joint tort-feasor, and with this conclusion we are not at liberty to interfere, if we were so inclined.

The eases cited by appellant merely hold that where a judgment is entered in form against the receiver, upon contractual obligations owing or for torts committed by the insolvent, the receiver, as such, is not personally liable, nor can such judgment be considered as an administration expense. Those eases proceed upon the theory that the receiver was guilty of no wrong, and merely defended the actions in order to obtain the judgment of a court as to the amount of the-claims.

In the instant ease, however, substantial evidence was introduced to the effect that the receiver was a joint tort-feasor ab initio,, and in such event the following principles of law are applicable:

Damages for injuries to persons or property during the receivership, caused by the. torts of the receiver’s agent and employees, are classed as a part of the operating expenses of the corporation. Such expenses are to be paid and are payable out of the-income of the property, if it is sufficient; or,, if necessary, out of the corpus. Bartlett v. Cicero Light, Heat & Power Co., 177 Ill. 68, 52 N. E. 339, 42 L. R. A. 715, 69 Am. St. Rep. 206; Ratcliff v. Adler, 71 Ark. 269, 72 S. W. 896; Cole v. Edwards, 52 Neb. 711, 72 N. W. 1045; First Nat. Bank of Pawnee City v. Avery Planter Co., 69 Neb. 329, 95 N. W. 622, 111 Am. St. Rep. 541; Frick-Reid Supply Co. v. Hunter, 47 Okl. 151, 148 P. 83; Cook v. Hopper, 23 Mich. 511; Brown v. Winterbottom, 98 Ohio St. 127, 120 N. E. 292, 3 A. L. R. 1465; Koch v. Peters, 97 Wis. 492, 73 N. W. 25; Adams v. Savery House Hotel Co., 107 Wis. 109, 82 N. W. 703; Sparks v. Kuss et al., 195 Wis. 378, 216 N. W. 929, 218 N. W. 208; Cowdrey v. Galveston, H. & H. Ry. Co., 93 U. S. 352, 23 L. Ed. 950; McNulta v. Lochridge, 141 U. S. 327, 12 S. Ct. 11, 35 L. Ed. 796; 23 R. C. L. p. 86; 34 Cyc. (Receivers) 352, 354, subdivision D.

‘ Where a receiver of a national bank is appointed by the comptroller of currency, a judgment entered after the appointment, in an action begun in a state court before the appointment, is binding upon the receiver as well as upon the bank. Riehle v. Margolies, 279 U. S. 218, 49 S. Ct. 310, 73 L. Ed. 669.

That the state court had a right to render a judgment against the receiver for the tort of the bank committed before the receivership cannot be denied; and it is likewise clear that the same court had a right to include in that judgment the damages to appellee which were occasioned by the wrongful conduct of the receiver, if any. That the state court included both items in its judgment we think there can be no doubt, for it rendered judgment for damages covering the entire period from the date of the attachment until the time of the judgment. It is quite certain that the bank committed no overt wrong after the receiver was appointed, for it then had no power to act, other than through the receiver. The wrong which it had caused by the attachment suit was a thing for which the receiver, as such, could not be held liable, unless he ratified it. But it was his duty, after qualifying as receiver, upon becoming acquainted with the facts to do all within his power to extricate the bank from the perilous situation in which it had placed itself. He not only did not do so, but he, as receiver, persisted in defending the bank’s original position, and vigorously contested appellee’s title to the property throughout the entire period of litigation. Under the decisions above cited, we think the receiver was clearly a joint tort-feasor ab initio, and that the state court had jurisdiction to render such judgment as it did.

The law as declared by the Supreme Court of Wisconsin on appeal from the judgment of the state court, Sparks v. Kuss et al., 195 Wis. 378, 216 N. W. 929, 218 N. W. 208, is conclusive as to the amount and kind of judgment. Erom the record of that case, which is before us, we think it quite obvious that the judgment was rendered against the receiver as a joint tort-feasor. Of course, neither the Supreme Court nor the state court of Wisconsin decided that appellee’s claim was a part of the operating expenses of the receiver. That was a question to be decided by the comptroller of the currency and the receiver, subject to review by the District Court. The records of the litigation in the state courts of Wisconsin, and the circumstances surrounding that litigation, were in evidence before the District Court, and we think that court properly held that appellee’s claim constitutes an administration expense and is entitled to priority over general creditors. In view of these conclusions, the court’s rulings as to the admissibility of evidence, and its refusal to make certain findings of fact as requested by appellant, were proper.

Affirmed.


author: BRYAN, Circuit Judge. HUTCHESON, Circuit Judge

text:
    EAGLE COTTON OIL CO. v. SOUTHERN RY. CO. et al.
    No. 6126.
    Circuit Court of Appeals, Fifth Circuit.
    July 21, 1931.
    Rehearing Denied Sept. 4, 1931.

      E. B. Williams, of Meridian, Miss., Luther M. Walter, John S. Burchmore, and Nuel D. Belnap, all of Chicago, Ill., and Allan P. Matthew, of San Francisco, Cal. (Felix T. Smith and Samuel L. Wright, both of San Francisco, Cal., Paul M. Gregg and Jerry H. Powell, both of Los Angeles, Cal., F. F. Thomas, Jr., John 0. Moran, Pillsbury, Madison & Sutro, and McCutehen, Olney, Mannon & Greene, all of San Francisco, Cal., on the brief), for appellant.
    Joseph P. Cook, of Washington, D. C., A. S. Bozeman, of Meridian, Miss., W. N. Mc-Gehee, of Washington, D. C., W. E. Baskin, of Meridian, Miss., James E. Lyons and Burton Mason, both of San Francisco, Cal., and Harry McCall, of New Orleans, La. (Baskin, Wilboum & Miller and Bozeman & Cameron, all of Meridian, Miss., on the brief), for ap-pellees.
    Before BRYAN, FOSTER, and HUTCH-ESON, Circuit Judges.
   BRYAN, Circuit Judge.

This is an action by appellant on an order of the Interstate Commerce Commission awarding reparation on account of excessive freight rates collected by the appellee railroad carriers for. the transportation of coal from mines in Alabama to Meridian, Miss. The' published rate of $2.03 per ton was held by the Commission, in a proceeding begun before it by appellant in 1925, to have been excessive to the extent that it exceeded $1.85 per ton from certain mines and $1.95 from other mines, and these lower rates were prescribed as reasonable for the future. Appellant was' awarded reparation measured by the difference between the lower and higher rates on shipments received within two years prior to the filing of its claim up to March 8, 1928, the date of the order. Eagle Cotton Oil Co. v. Southern Railway Co., 140 I. C. C. 131. No attack is made upon the reasonableness of the new rates as applied to the period covered by the reparation award. But the "District Judge, before whom the case was tried without a jury pursuant to written stipulation, held that the Commission was without power to award reparation on account of shipments made-prior to the date of the order finding the-$2.03 rate to be unreasonable, because that rate had been fixed and prescribed by it, and, this being so, must be conclusively presumed to have been a reasonable and lawful one. He therefore entered judgment denying appellant’s claim for damages. 46 F.(2d). 1006.

On July 22, 1915, the Commission, in passing upon a proposed increase of rates on coal, authorized a rate not exceeding $1.-20 per ton from the Alabama mines to Meridian. Coal & Coke Rates in the Southeast, 35 I. C. C. 187, 202. An increase of 10 cents, per ton, effective July 1, 1917, was authorized in The Fifteen Per Cent. Case, 45 I. C. C. 303. On June 25, 1918, another general increase, but without reference to any particular rate, was made by the Director General, and thereupon appellees published a rate on coal of $1.80 per ton; but this was done without the order or approval of the Commission. On August 26, 1920, the Commission authorized a general increase of 25 per cent, of freight rates, but without approval of any particular rate, Ex parte 74, 58 I. C. C. 220; and appellees raised the rate here involved to $2.25 per ton. On July 1, 1922,, the Commission recommended a general reduction of 10 per cent, also without approval of any particular rate, Reduced Rates, 1922, 68 I. C. C. 676; and appellees thereupon reduced the rate in question, to $2.03 per ton, which they continued to collect up to March 9, 1928, when the $1.85 and $1.95 rates were established by the Commission as maximum rates from the Alabama mines to Meridian. Eagle Cotton Oil Co. v. Southern Railway Co. et al., supra.

These several decisions of the Commission and the order of the Director General are relied on to establish the conclusion that the $2.03 rate was fixed and prescribed by the Commission as a reasonable and lawful maximum rate. The rate of $1.20 per ton on shipments of coal from the Alabama mines to Meridian was the only one that was definitely and specifically authorized by order of the Commission. That rate became effective oq October 1, 1915, and, as thej law then was, expired by limitation at the end of two years. Act Feb. 4,1887, § 15, as amended by Act June 29,1906, § 4, Act June 18,1910, § 12, 36 Stat. 551. It was not until after the passage of the Transportation Act of 1920 that a rate established by the Commission. could continue in force without time limit until its further order. 49 USCA § 15 (2). The Commission’s order in the Fifteen Per Cent. Case, supra, effective July 1, 1917, authorized a general increase of 10 cents per ton throughout the country, but did not purport to grant permission to advance any particular rate. The order of the Director General‘in 1918 likewise was dealing with all rates, and had no particular reference to rates on coal; besides it was not the equivalent of an order of the Commission, and the Commission by section 10 of the Federal Control Act (40 Stat. 456) was given the power to suspend or set it aside. But with the aid of the Director General’s order the rate did not exceed $1.80 per ton, which was less than the rates approved by the Commission upon the basis of which it awarded reparation to appellant. The carriers rely on Ex parte 74, supra, which authorized an increase of 25 per cent, in the general level of all rates, but without approval of any particular rate, as their authority for increasing the rate on coal shipped from the Alabama mines to Meridian to $2.25 per ton; and then claim that the rate became $2.03 per ton in 1922 as a result of the Commission’s decision in Reduced Rates, 1922, supra. The most that can reasonably be contended for in support of the proposition adopted by the trial court that the $2.03 rate was Commission-made is that it resulted from adding to and building up the rate of $1.20 that was authorized by the Commission. Aside from the fact that the Commission’s order entered in 1915, establishing the $1.20 rate, had expired by limitation long prior to the decisions in Ex parte 74 and in Reduced Rates, 1922, the law, as we understand it, is that orders of the Commission authorizing a general upward x’evision or adjustment of rates are not to be construed as giving approval of or prescribing particular rates. In Brimstone R. & Canal Co. v. United States, 276 U. S. 104, at page 122, 48 S. Ct. 282, 287, 72 L. Ed. 487, the Supreme Court said: “The general findings and permission of Ex parte 74 and Matter of Reduced Rates did not approve or fix any particular rate. * * * In them the Commission was dealing with the whole body of rates throughout the country — was looking at the general level of all rates — and the propriety of the rates to which the Brimstone Company was party was not the subject of particular investiga^ tion or consideration.” It is true that case was dealing with a division of rates, but the principle involved is the same here as it was there. The Supreme Court in that case cited with approval, among other decisions of the Commission, Steel & Tube Co. v. Director General, 61 I. C. C. 526, in which the Commission said that its “sanction of a general adjustment does not carry with it the approval of any particular rate.” We are of opinion, therefore, that the trial court erred in holding that the $2.03 rate collected from appellant by appellees had been fixed and prescribed by the Commission, and in entering judgment rejecting appellant’s claim for reparation. Having reached this conclusion, it is not necessary in this ease to decide, and we do not decide, whether or not the power of the Commission to award reparation extends to rates of its own making. The decision of the Circuit Court of Appeals for the Ninth Circuit in Atchison, Topeka & Santa Fe R. Co. et al. v. Arizona Grocery Co., 49 F.(2d) 563, to the effect that the Commission was without jurisdiction to award reparation, proceeded on the theory that the rates there involved were Commission-made. The rate here involved in our opinion was made by the carriers, and if it was, of course, the Commission, upon a valid finding that it was excessive, had the power to award reparation. 49 USCA § 9.

The judgment is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.-

HUTCHESON, Circuit Judge

(concurring).

I concur in the judgment of reversal. I think it plain that the rate made the subject of the reparation order was not one which had been specifically promulgated by the Commission. I think it equally plain that, speaking generally, the rate had received the Commission’s approval and sanction.

I understand appellee to contend that in either event reparation could not have been ordered.

In my opinion neither specific approval by the Commission of a general schedule of .rates, nor the specific promulgation of a particular rate, prevents the Commission from granting reparation as to that rate, if, upon complaint, it is advised that reparation should be made.

I place my concurrence on the broad ground, therefore, that it is immaterial whether the rate made the subject of the reparation order was, as the trial court held, Commission-made, or as the Court of Appeals holds, carrier-made. If a shipper has been injured by it, the Commission, and the Commission alone, may order reparation.

By the Transportation Act Congress has placed squarely upon the carriers the burden of establishing and maintaining just and reasonable rates, has made the carriers responsible in damages to any person injured by their failure to do so, and has directed the Commission to hear the shipper’s complaint and if well founded, to award damages thereon.

By a long line of decisions built upon Texas & P. Ry. Co. v. Abilene Cotton Oil Co., 204 U. S. 426, 27 S. Ct. 350, 51 L. Ed. 553, 9 Ann. Cas. 1075, the character of the Interstate Commerce Commission, its functions as a “tribunal informed by experience” to decide rate questions between carrier and shipper, the limits, the extent of its powers, the sphere within which and the method by which it may and must operate, have been carefully worked out and set down.

In addition, the Interstate Commerce Commission has through a long course of practice, and in a series of decisions of its own, built up and established for itself with the sanction and approval of the courts, a character of flexibility in the matter of the approach to, the consideration and determination of, rates and practices, and the results flowing therefrom in which the principle of res judicata or estoppel by decision has had and can have no just place.

It must of course be conceded that Congress could have by enactment at any time changed this settled character of the Commission and converted it into a body not supervisory and regulatory of carrier rates as it now is, but one which like the state commissions shall in a rigid and final way, except for direct resort to the courts, fix and prescribe rates. I think it perfectly plain that it has never done so.

In view of the structure and history of the act, the long-continued operations under it, the uniform current of opinion in the Commission and in the courts as to the dual function which permits the Commission prospectively to control the course of rates while preserving its power to retrospectively correct them and to award damages for injustices and injuries which have flowed from their establishment; in view of the fact that though the act now invoked to deprive the Commission of this power of re-examination has long been in existence, this is the first ease in which such a holding has been sought —I think it plain that those who would maintain that Congress intended a different character for the Commission should be prepared to point to some clear enactment carrying that intention.

The invoked decisions of the state courts do not support the position of appellee here. They make strongly against it. They show that instead of the states having a rate-making system like the federal one, not rigid, but flexible, which permits its commissions from time to time and at any time to malee orders changing rates, correcting abuses, reforming conditions, and awarding reparations, while in reliance upon the power of the Commission to retroactively repair injuries sustained as the result of their prospective orders, shippers may experimentally try out rates before resorting to the courts for relief, their systems are rigid and inflexible.

Under their systems their Commissions make their rates, and until set aside by the courts they are final and conclusive on carrier and shipper alike.

In the state of Texas, for- example, the law requires, not the carriers, but the Commission to establish reasonable rates. It provides for a review by the courts of any rate, classification order, etc., adopted by the Commission whether at suit of carrier or shipper, in which the unreasonableness or injustice, not of the carrier’s, but of the Commission’s rates and practices may be brought into question. Unless upon a timely suit the rates are found unreasonable, they are by law made uncontrovertible as between carrier and shipper. Missouri-Kansas & T. R. Co. v. Railroad Commission (Tex. Civ. App.) 3 S.W.(2d) 469; Producers’ Refining Co. v. Missouri, K. & T. R. Co. (Tex. Com. App.) 13 S.W.(2d) 679. While in Louisiana though the Commission has the right to award damages, the statute limits the damages which may be awarded to those resulting from “violation of rates, classifications, rules, regulations or orders adopted by the Commission.” Texas & P. R. Co. v. Railroad Commission of Louisiana, 137 La. 1059, 69 So. 837, 839.

The courts in both of these states, in fact in all of the states, decisions from which are cited by appellee, give full recognition to the difference in the character and structure of the jurisdiction exercised by the Interstate Commerce Commission and that exercised by their own commissions.

In the opinion of the Circuit Court of Appeals in Atchison, Topeka & Santa Fe R. Co. v. Arizona Grocery Co., 49 F.(2d) 563, 568, holding that the Commission eould not award reparation as to the rates specifically theretofore prescribed by it, it is said that under such circumstances “the shipper’s remedy would be a seasonable application for a change of rate before any serious damage had been suffered.”

In my opinion this will not do. This is indeed the remedy, and the only remedy, the shipper has under the state system. This is, however, not the ease under the federal system. Here the remedy is simpler, more efficacious, more reasonable, more just to shipper and carrier alike, and more consonant with the experimental character of rates and rate making. This system permits rates to be experimentally laid down and experimentally tried out. It preserves that flexibility of adaptation, the maintenance of which is necessary to the life and growth of our great and changing commerce, which would be lost and defeated if immediate resort to the courts were necessary, as in the state systems, to protect the rights of shippers against the burdens of an experimental rate.

This system, without fixation or rigidity, leaves it to the Commission to deal justly and fairly by carrier and shipper alike, authorizing it to use its powers to effect and maintain a reasonable rate structure through constant experiment and change, while preserving to it the right at any time upon complaint to relieve by specific reparation awards those who have suffered from temporary or particular inequalities and imperfections of this rate structure.

For the courts to now hold, in the absence of some specific and compelling congressional command, that sueh a system, so flexible, so reasonable, so adapted and adaptable to the commerce of this nation, so long an integral part of its operations under the sanction of the courts, is not in accordance with the law, would be in my opinion unwise, unreasonable, and wholly without legal warrant.


author: DENISON, Circuit Judge. HICKENLOOPER, Circuit Judge

text:
    WESTINGHOUSE ELECTRIC & MFG. CO. v. WADSWORTH ELECTRIC MFG. CO.
    No. 5231.
    Circuit Court of Appeals, Sixth Circuit.
    July 2, 1931.
    HICKENLOOPER, Circuit Judge, dissenting.

      D. W. Cooper, of New York City (Victor S. Beam, of New York City, Walter M. Shohl, of Cincinnati, Ohio, and Thomas J. Byrne, of New York City, on the brief), for appellant.
    W. F. Murray, of Cincinnati, Ohio (Mars-ton Allen, of Cincinnati, Ohio, on the brief), for appellee.
    Before DENISON, MOORMAN, and HICKENLOOPER, Circuit Judges.
   DENISON, Circuit Judge.

We granted a rehearing and took briefs solely upon one question, said to be involved, and which, as paraphrased and applied is:

If Wadsworth, in 1907, conceived an invention and “reduced it to practice” by one instance of use, but did nothing more with it until he filed his application in 1916, while Kries invented and filed his application on the same device in 1910, whereupon the Patent Office found Wadsworth’s reduction to practice, hut rightly awarded priority to Kries because of Wadsworth’s nonaetion (under the Mason v. Hepburn rule, 13 App. D. C. 86) and patent issued to Kries, is Wads-worth nevertheless such a prior inventor as to invalidate the Kries patent, as to its claims which were in interference ? This we thought an interesting question, and on account of its importance and, perhaps, novelty, one deserving careful examination; but study of the record does not show that it is so presented as to call for decision of the question in its broadest aspect — the effect of a final finding which underlies and supports an issued patent.

The fundamental question whether Wads-worth did, before 1910, so perfect and test his constructed device as to make his invention then complete enough to make him the “inventor,” under the patent law, presents itself in two aspects: First, as to the effect of the Patent Office proceedings upon our inquiry into the fact; and, second, as to the proofs, independently examined.

Upon the Wadsworth-Kries interference, Kries was the senior applicant, by six years. The Examiner of Interferences awarded priority to Kries. His opinion is not in the record, but the references to it by the board and by the commissioner show that he thought Wadsworth had not completed a reduction to practice because upon the test the device was abandoned, and the test must therefore be considered unsatisfactory; and show that the Examiner also thought that, in any event, Wadsworth had lost his right to a patent under the Mason v. Hepburn rule. Upon appeal, the board filed an opinion concluding that Wadsworth’s test should not be deemed unsatisfactory to him, but that the underwriters’ rule excused his failure to proceed and apply for a patent or to commercialize the invention. The board then holds that in spite of Wadsworth’s reduction to practice, he had so abandoned and concealed and negligently suppressed his invention that he could not escape the estoppel. Its conclusion, “The decision of the Examiner of Interferences is affirmed,” was necessarily based upon the estoppel, and would have been just the same if the board had omitted any discussion of reduction to practice. Upon appeal, the commissioner, in his opinion, takes up and discusses the question of estoppel, not considering the question of reduction to practice; and, concluding that “the conclusion reached by the board as to estoppel is deemed to have been correct,” announces that the decision of the board is affirmed. Clearly, this opinion decides the question of estoppel and no other question. The only reference to any other is the statement that, if the hoard was right as to the reduction to practice, that does not excuse the suppression and concealment which raised the estoppel. The final award of priority by the commissioner was therefore in favor of Kries.

For the purpose of this ease (but without deciding), we may concede, to the fullest extent claimed by Wadsworth, that a final finding of fact by the Patent Office in interference proceedings, upon which finding the later action of the Patent Office is based, becomes a quasi-adjudication when the same question of fact arises later between the same parties in an infringement suit upon the resulting patent [See Morgan v. Daniels, 153 U. S. 120, 14 S. Ct. 772, 38 L. Ed. 657; Rousso v. Bank (C. C. A.) 37 F.(2d) 281, 284]; but that concession does not help here. The only one of the three awards which has color of any finding in favor of Wadsworth was that by the board. In addition to such results as come from observing the nonjudieial character of this tribunal, there are two reasons why there is no adjudication. One is that the conclusion by the board was appealed from. Whatever the effect of a review by a writ of error, there seems no doubt that an appeal to a reviewing tribunal which hears the matter de novo suspends the estoppel of the decision appealed from, and thereafter the existence or the lack of estoppel is determined by the order of the reviewing tribunal. The thing to he decided in an interference is as to the commissioner’s duty to issue the patent to one or another applicant; in a substantial sense, as well as because he has the power to review, the decisions of the lower tribunals are advisory to him. It seems clear that, after the decision of the board has been appealed from and the whole controversy submitted to the commissioner and decided by him, the board’s decision no longer remains as an existing judgment. From the decision of the commissioner against Wads-worth, no conclusion in his favor can be implied; from the opinion of the commissioner, it is clear that he did not intend to make any finding of fact in favor of Wadsworth. Hence, the necessary basis for estoppel by judgment is not to be found in the decision of the board.

The other reason is inherent in the nature of an estoppel by judgment. If for the plaintiff, it finally adjudicates those of the plaintiff’s rights which were essential to the judgment and, often, those which the pleadings or the proofs show did in fact lead to and support the judgment; and it adjudicates all the defenses which were made or might have been made. If for the defendant, it prevents the future assertion of any right which the plaintiff properly did assert or might have asserted ; or it establishes the affirmative defense, if there was any, which in fact led to the judgment. These principles do not reach a situation where the court made a finding in favor of plaintiff upon a point in dispute, but then held that, for another reason, plaintiff must be defeated. We are not aware of any decisions which carry the rule to that extent; and to do so suggests a paradox. A recited finding in favor of A is not an element essential or pertinent to a judgment against him. See B. C. L., Judgments, §§ 451-454. For this reason also we must think that there is no estoppel by judgment arising against Kries from the Patent Office proceedings.

No more do we consider Wadsworth estopped now to claim that his invention was anticipatorily complete. One in his position may have thoroughly established his status as an inventor entitled to a patent, and yet have forfeited that right by nonclaim (Corona Co. v. Dovan Corp., 276 U. S. 358, 384, 48 S. Ct. 380, 72 L. Ed. 610); and we do not interpret the decision of the commissioner as going beyond a declaration of such forfeiture.

Taking .up the other aspect, and examining the proofs independently: We do not see that Wadsworth, alleging anticipation, is in any exceptionally favorable position, because he tried to get this patent and failed. His proofs must be tested by the standard criterion. They must convince beyond a reasonable doubt, or reach substantially that standard of certainty. The Barbed Wire Patent, 143 U. S. 275, 284, 12 S. Ct. 443, 36 L. Ed. 154; Eibel Co. v. Paper Co., 261 U. S. 45, 60, 43 S. Ct. 322, 67 L. Ed. 523. Consideration of them leaves grave doubts as to the time when Wadsworth made his device, as to its perfection to meet the terms of the claim in a vital point, as to its effective test, and as to whether it must not be classed as an abandoned experiment. Experiment it certainly was, in every way; abandoned it apparently was, in the ordinary meaning of the word. Wadsworth literally “put it in the junk,” to use his own words. Experiments which, in retrospect, seem to have been successful, but which went into the junk pile, were usually abandoned because they seemed to have no commercial value — were not worth while. Wadsworth’s rather unique reason for this conclusion (his discovery of a prohibitive insurance rule) does not make a unique case. Besides, it does not ring quite true as a sufficient reason. It is true that the failure to put into commercial use a device which has been “reduced to practice” does not necessarily take it out of the category of completed inventions. Corona Co. v. Dovan Corp., supra. It is equally true that though filing an application is a reduction to practice and for some purposes a constructive completion of the invention, this does not of itself finally take the device but of the category of abandoned experiments. The Corn Planter Patent, 23 Wall. 181, 211, 23 L. Ed. 161. Each ease must be classified on its facts.

The whole fact-controversy is thoroughly discussed by counsel; there is nothing to be gained by further discussion here. Our original conclusion is reaffirmed, and mandate will issue in accordance with the opinion on file.

HICKENLOOPER, Circuit Judge

(dissenting).

An anomalous situation is obviously presented where, as here, the Board of Examiners in Chief specifically found prior conception and reduction to practice by the junior applicant in an interference proceeding, but that the doctrine of Mason v. Hepburn applied and “priority” must therefore be awarded and a patent granted to the senior applicant, and this holding is broadly affirmed by the commissioner. In such a case it would seem that the interference should have been dissolved and both applications rejected. Perhaps this question can be presented to the reviewing courts only after appeal to the Court of Customs and Patent Appeals from the decision of the commissioner, or by proof, in a subsequent suit for infringement, which meets all-the requirements of certainty and conviction; but I also feel that lack of exactly analogous precedent should not prevent extension to the present ease of the broad underlying principles of the decision in Morgan v. Daniels.

Were I not convinced in my own mind that the grant of a patent to Kries was wholly inconsistent with the finding of fact of prior conception and reduction to practice by Wadsworth, I should feel less justified in submitting this dissent; but that very issue of fact seems to me determinative of a contrary result in the Patent Office, and it is the administrative, decisions of fact, and not the ultimate and erroneous conclusions of law, with which we are here concerned, and with which the Supreme Court was concerned in Morgan v. Daniels. Compare also Johnson v. Towsley, 13 Wall. 72, 86, 20 L. Ed. 485.

Nor can the result in the Patent Office be passed off as implying the necessary conclusion that Wadsworth’s action amounted only to an abandoned experiment. The board did not so find. The commissioner in no way intimated an opinion contrary to that of the board. Conceding that Wadsworth reduced his conception to practice in the full sense of the word, and that the board so found as a fact, the ultimate grant of a patent could be awarded Kries only upon a reversal of such finding, at least presumptively correct under Morgan v. Daniels, and the commissioner con-cededly did not reverse. The ease is not one for the strict application of principles of res adjudicata in courts of law, but one of the presumption of regularity, correctness, and finality of fact decisions by administrative officers or tribunals.

But if the case properly turns only upon the weight and eonelusiveness of the evidence of prior invention, I am of the opinion that the Kries patent is invalid. The entire record of the interference proceeding was stipulated into the present record. It is sufficient to here say that I was convinced by it and concur in the fact finding of the Board of Examiners in Chief. Certainly the evidence does not carry thorough conviction to the contrary, and 'this, I think, is sufficient under application to the doctrine of Morgan v. Daniels, even though that case is not precisely parallel in its facts. The lack of commercial use of the invention by Wadsworth is, of course, immaterial under Corona Co. v. Dovan Corp., 276 U. S. 358, 384, 48 S. Ct. 380, 72 L. Ed. 610. No test was necessary; the operativeness, as an anticipation, of the device actually made seems to me apparent.

       Sharon v. Hill (C. C. Cal.) 26 F. 337, 345; Eastern v. Welling (C. C. S. C.) 103 F. 352, 355; Green v. U. S., 18 Ct. Cl. 93, 106, 107.