text:
    In re PENNSYLVANIA R. CO.
    No. 131.
    Circuit Court of Appeals, Second Circuit.
    April 6, 1931.

      Chauneey I. Clark, of New York City, for appellant.
    George V. A. McCloskey and Willmm F. Purdy, both of New York City, for appellees Cleary Bros., Inc., and others.
    William F. Purdy and John E. Purdy, both of New York City, for appellee Hughes.
    Warner Pyne, of New York City, for appellees City of Long Beach and others.
    Macklin, Brown, Lenahan & Speer, of New York City (George V. A. McCloskey, of New York City, of counsel), for claimants.
    Single & Single, of New York City, for claimant Armstrong Transportation Co.
    Leo J. Curren, of New York City, for claimant James McWilliams Blue Line, Inc.
    Park, Mattison & Lynch, of New York City, for claimants Mark W. Maclay and Charles E. McWilliams.
    Foley & Martin, of New York City, for claimant Red Star Towing & Transportation Co.
    John R. McMullen, of New York City,, for claimant Cleary Bros., Inc.
    Otto & Lyon, of New York City, for claimant Harold L. Valentine, Inc.
    Before L. HAND, CHASE, and MACK,. Circuit Judges.
   L. HAND, Circuit Judge.

The Pennsylvania Railroad Company jnaintains a terminal for the transportation, of coal to the City of New York at SouthAmboy, New Jersey, at tbe mouth of the Raritan River opposite the southern end of Staten Island. The tracks end in coal chutes upon the piers, whence the coal falls into barges which are brought beneath to be filled. Thereupon they are towed away, made up into flotillas and hauled through the Kills to the Upper Bay, and so to the city. While awaiting their turn at the chutes, they are moored in large numbers at a mooring rack some twelve hundred feet long, not far from the piers. The road does not try to keep the barges in any order at the rack; they are laid helter-skelter as they chance to arrive, or as it may he convenient to dispose them. Nor does it keep any plan of their arrangement in the coal office upon the pier; the employees, although they have a record of such boats as have been left, do not know where amongst the lot any particular one may have been put.

When a parcel of coal consigned to a given dealer is ready to be dumped, the barge which he has sent to lift it, must therefore be drilled out of the mass of barges moored indiscriminately at the rack and brought to the chutes. This may involve no more than taking her from the outside tier, or it may require the casting off of twenty or thirty outside barges, until she can be reached. This is the work of one or more tugs kept for that purpose in the vicinity; on the day in question, a Sunday in October, the “Brinton” was the only tug so employed. The practice is to tell the tug to fetch the consignee’s barge, when the .time comes to unload the ears which hold his coal; the tug goes to the rack, breaks out the barge and brings it to the chute.

On the afternoon in question there was a northwesterly gale, blowing off-shore, which swept the length of the rack, along which over fifty barges were moored, six or seven tiers deep. The “Brinton,” which had already drilled out several barges for the chutes without mishap, got orders from the coal department to break out a barge, called the “Blue Coat,” several tiers inside, whose owner’s coal was then ready to be loaded. She went to the clustered barges, east off the side lines of those outside, and was in train of laying a line to the “Blue Coat,” when the hawsers parted of some twenty-two or twenty-three, so pushed away to give her access. She tried unsuccessfully to manage the flotilla thus afloat, but it at once passed out of her control, and drifted easterly in the Lower Bay at the mercy of wind and sea. The boats held together for a while, but eventually broke apart, some going aground at Great Beds Light for a while, and later drifting out into the wider reaches of the Bay; the rest separating in various directions.

It is unnecessary, and indeed impossible, to follow the fate of each barge. Some were recovered while ¿float; a few let go their anchors, though only one held, and then only because it fouled a cable. The greater part drifted clear across the Bay past Coney Island, and by Monday morning were off the westerly end of Long Beach. Even there they did not stop, but went ashore, or drifted near land, at Short Beach, Jones Beach, and even as far as Eire Island. Many were a total loss, for which their owners are claiming here. One eventually went to pieces against the Boardwalk at Long Beach in a southerly storm on Wednesday, doing great damage to that structure. The City of Long Beach and Long Beach-on-the-Ocean, Inc., are claimants for that damage.

The “Brinton” stood by on Sunday night, but on Monday morning, believing that she could do no more, cut her hawser, took the crews off the barges and put back, being out of fuel and food. The road’s marine officials at Jersey City had meanwhile learned of the disaster, and on Sunday evening sent to the rescue two tugs, the “Number 32” and the “Overbrook,” more powerful than the “Brinton.” The “Overbrook” took the. ground in her efforts, and perhaps the “Number 32” as well, though that is in dispute. They plied about in the darkness, picking up what they could, but not very effectively, since the conditions forbade much service. On Monday morning at about nine the road chartered the wrecking tug, “Resolute,” and visited the shore where those barges still lay which had not been recovered. They were scattered along the beaches among the breakers, and it appeared to those on board impossible to reach them. Meanwhile a Coast Guard vessel had got hold of one, and a fishing vessel had picked up another. These the “Resolute” took in tow and brought back safely, at about four o’clock on Tuesday morning.

By Monday morning the storm had somewhat subsided, and it was relatively calm all of Tuesday and on Wednesday morning until shortly before noon, when the wind, which had meantime hauled to the south, again rose to thirty-four miles and blew on shore. Although the evidence does not certainly prove so, it was probably at this time that a single barge, the Hill, did substantially all the damage to the walk. On Tuesday, and probably also on Monday, though it is not necessary so to find, officials of the City of Long Beach advised the road that two barges then near shore were likely to damage the walk, and the road’s officials tried again to charter the “Resolute,” but without success, she being then engaged elsewhere. Finding that the wreckers had no other craft available, they did nothing more. Small craft, fishing boats and launches, busied themselves on Monday and Tuesday with the rescue, in several eases successfully; but the road made no effort to. secure the services of these vessels. On Sunday night, the tug, Hughes, set out from South Amboy and brought back five barges; for this she asks and has secured a salvage award.

Several of the barge owners sued the road and as more suits were in prospect, it commenced this limitation proceeding, surrendering the “Brinton,” which it now concedes to be guilty, and asking exoneration in person-am under the statute. .The claimants appeared in number and contested the limitation, alleging that the road was in privity with the tug’s fault. The facts as to this were as follows: One, Crane, was the “terminal shipping agent” of the road at South Amboy, and was in general charge of discharging coal ears and loading barges. He had had no marine experience, and knew nothing of the handling of barges and tugs, except so far as his position might acquaint him as the work went on. He told the tug masters when he was ready for a barge, specifying that which he would next want. Both he and the master of the “Brinton” swore that his orders left it to the discretion of the tug master, how to drill out a barge, and whether the weather conditions at the time justified compliance. Crane did not know— nobody in the coal department or probably anywhere else knew — where in the cluster any given barge was; it was left to the tug master to decide whether it was safe to carry out the order. Those in charge of the marine service of the road were at Jersey City, some miles away; at the scene of the misadventure there was nobody in charge but Crane.

The District Judge held the “Brinton” at fault for trying to take out the “Blue Coat.” He charged the road with all the resulting damage to the barges and the Boardwalk, and refused to allow limitation; holding that Crane was a superintendent in privity with the road, whose order to the “Brinton” to fetch the “Blue Coat” was peremptory, and was made with knowledge of the dangers involved. Thus it became unnecessary to consider whether there was any succeeding duty, after the marine superintendent at Jersey City learned of the disaster, to exercise any care to save the barges, or protect the walk. The road appealed; so did the tug, Hughes,' for insufficiency of her salvage awards.

We are entirely satisfied, so far as concerns the fault of the “Brinton,” that the limitation should have been allowed, and if the ease ended there, it would in our judgment present little difficulty. Crane was not placed in charge of the drilling of the barges, and could not be supposed to know anything about marine matters. We need not dwell upon the evidence in detail; it is perfectly apparent that he was wholly unfitted for any such duties, and it would be altogether unreasonable to suppose that he should intervene or direct the conduct of the tugs. He was a landsman whose undisputed testimony that he was intended to act only as such, is corroborated beyond dispute by the organization of the business at the terminal. We cannot conceive that his order to drill out a barge should have been understood by the tug master as- peremptory, or to supersede his own judgment. The “Brinton” was fit for. the work, had already conducted it successfully, and the only fault was that of her master, who should not have undertaken to penetrate so far among the barges without help.

This fault being conceded, the tug is forfeit, but the road was entitled to limitation for any consequences “proximate” upon the original act. All the resulting damage seems to us such; it was not unlikely that such a number of barges, breaking loose in a gale, might spread upon the waters and drift at random. They might go ashore anywhere, and were likely to damage whatever they struck, the Boardwalk, or any other structure near the water. But, unless the subsequent notice to the marine superintendent, imposed an independent and affirmative duty upon the road, it is impossible to see any defence to the petition.

As to the barges themselves there was, however, such a duty. The road was a bailee. McWilliams Bros. v. Director General, 271 F. 931 (C. C. A. 2); Doherty v. Pa. R. Co., 269 F. 959 (C. C. A. 2); The Wyomissing, 45 F.(2d) 160 (C. C. A. 2); Stevens v. The White City, 48 F.(2d) 557 (C. C. A. 2). The relation is analogous to that of a tug which temporarily moors a barge on route, or at the end of the voyage. Bouchard Transp. Co. v. Pa. R. Co., 6 F.(2d) 362 (C. C. A. 2); McWilliams v. Davis, 285 F. 312 (C. C. A. 2); The Howard, 252 F. 85, (C. C. A. 2). Though it does not appear that the road towed all the barges from New'York to South Amboy, that in our judgment made no difference. The rack was the place fixed by the road for the delivery of barges to be loaded and then put into its tows. Nobody could expect an owner’s tug to stand by until at the road’s convenience it should take a barge out to be laden. Nor is it reasonable to suppose that nobody should meanwhile be responsible for its care, being itself helpless. We hold that the road received the boats as bailee and became responsible for a bailee’s care until they were delivered.

If so, that duty remained as long as the bailment; it was not discharged as soon as the barges broke adrift. Hence when the marine superintendent at Jersey City learned of the plight of the flotilla on the afternoon of Sunday — he being a person in “privity” with the road under the limitation statute — any subsequent neglect must be charged to the road without limitation, and the question becomes one of fact; whether the road did all that a bailee should. We see no reason to complain of its action on Sunday night. The “Brinton” stood by; the “Number 32” and the “Overbrook” were sent to the rescue. So far as we can see, they did all that they could. The next morning the “Resolute” was chartered and went to the beaches; but Newman, the only witness called, swore that it was impossible to reach the barges, which were too far inshore. The “Resolute” stood by until Monday afternoon and then gave up, thinking that it could do no more. It is exceedingly improbable, having come for that purpose, and being by profession a wrecker, that she would have made no effort, if help was possible. On Tuesday the road, warned by the City of Long Beach, again asked for the “Resolute,” or some other craft of the wrecking company, but was unable to get any; there is no reason to impugn its good faith. It appears to us that so far as large craft is concerned, nothing more was to be expected. To be sure, the road might have sent its own tugs again, and its efforts on Tuesday indicate that it then thought that more might be done, but it is entirely speculative to suppose that had another vessel once more gone to the beaches, she would have been of any more service than the “Resolute” on Monday. The claimants have the burden of showing fault, and loss arising from it (The 84-H, 296 N. 427, 432 [C. C. A. 2]); so far as this sort of effort would have helped, it seems to us that they have failed.

There remains the question whether the road should.have used other means. It appears that when Newman was at the beaches in the “Resolute” on Monday, he saw some launches or fishing boats engaged in recovering some of the barges. In this they were partly successful, but, except as to the Hill, there is no evidence that any of those not rescued were in a position where they could be. It would in any ease be necessary for a given owner to show that reasonable efforts would have salved his barge; it would not be enough to show that some unidentified barges might have been saved; perhaps they were. We cannot say, the burden being as it is, that any owner lost his property because of the road’s inaction.

This does not however apply to the Hill. One, Kuehnle, was a civil engineer, attached to the City of Long Beach, who swore that on Monday he went to the beach and saw near the shore the Hill and another boat, one of which had already done some damage to the Boardwalk. He telephoned to the offices of the road at Jersey City, and to Hill, who said that he had no further interest in the barge, which he abandoned to his underwriters. It does not very definitely appear who got the message at Jersey City, but on Tuesday morning at any rate, Newman got a second message, and this was the occasion for his trying to reeharter the “Resolute.” He did nothing further; nor did any one else until after the damage had been done. However, Kuehnle went down a second-time on Tuesday afternoon, and saw the two barges still afloat in about the same place. While he was there, a launch came in, picked up one of the two and carried it off without mishap.

Though the road cannot therefore limit its liability as to the Hill, it does not follow that the same is true as to the City and the Long Beach Company. It had no contractual relation with these, and was liable, if at all, only as a tort-feasor. So much damage as was done to the Boardwalk on Monday should be limited in any event; the road had had no adequate chance to act by small boats. But this was trifling and the real question is as to the rest. What we have to decide is whether the road’s knowledge acquired after the “Brinton’s” fault occurred, charged it with so much of the damage' as ensued thereafter, and as it could have prevented by reasonable efforts. We may assume that in general the extent of a man’s liability is to be measured by what he knew when he acted, except for the possibilities suggested in sections 195 and 196 of the Restatement of Torts (Tentative Draft No. 4); that is to say, save in unusual circumstances he does not become liable for injuries which he may later find his act will cause, if at the outset these were too unforeseeable to charge him.

That is not this ease. As we have said, the damage to the Boardwalk was fairly to be apprehended once the boats were set adrift; the road was charged with them, but the statute gave it a partial immunity. Should that immunity continue after knowledge is brought home? In form, at least, the section does not so read; it limits the “liability * * k for any * * * loss, damage, or forfeiture, done, occasioned, or incurred without the privity, or knowledge of such owner” (section 188, title 46, U. S. Code [46 USCA § 183]). “Done” must refer to “loss” or “damage,” though “occasioned or incurred” is as apposite to “liability.” Congress appears to have- had in mind the incidence of the fault, rather than its origin.

Such an interpretation does indeed imply that a person, who has set in motion a train of events likely to end in injury, remains under a duty to check them while he can; but this we think accords with good sense and ordinary notions of justice. It is true that the decisions do not cover the point, for the occasion to distinguish does not ordinarily arise. If his original liability ipso facto extends to all that is to be foreseen at the start, it would add nothing to put the tort-feasor under a continuing duty to check the culmination of his wrong. That can only become important when, as here, his liability changes meanwhile. Yet it is the injury that constitutes the wrong (Baltimore S. S. Co. v. Phillips, 274 U. S. 316, 47 S. Ct. 600, 71 L. Ed. 1069), and while the extent of liability is measured as of the time of. the initial lapse, if the evil is still preventable, it would be a perverse doctrine to charge the actor with no duty to intervene while he can. Faced with the choice, as res integra, we do not hesitate to impute such a duty. Therefore, we hold that as to the damage done on Wednesday the road cannot limit its liability.

That liability is justiciable in this proceeding, though the tort was not maritime, and the limitation be denied. Hartford Acc. & I. Co. v. So. Pac. Co., 273 U. S. 207, 217, 218, 220, 47 S. Ct. 357, 71 L. Ed. 612; Richardson v. Harmon, 222 U. S. 96, 32. S. Ct. 27, 56 L. Ed. 110. There remains therefore only the question as to whether the Hill, the City and the company by their inaction after notice,. disqualified themselves, and to what extent.. Hill we cannot charge. The only evidence- is that when on Monday afternoon Kuehnle called him up, he said that he had no further interest in the barge, and relied upon his underwriters. This is not enough, regardless of whatever be the duty to protect one’s property put in jeopardy by another; for such a duty cannot arise until it is apparent that the tort-feasor is not himself going to do what the law demands. The evidence does not show what Kuehnle told Hill, or that he had reason at that time to assume that the road would not do all it could to rescue the barge. Not till then was he required' to act. This is a defence and the road must prove it; we find the record too equivocal to support the conclusion.

The fact is otherwise as to the City .and the Long Beach Company. They were well advised of the danger to the Boardwalk on Monday, and telephoned the road on that day. The road took no action, and they called up again on Tuesday morning. Again, nothing was done. They waited during the whole of that day and on Wednesday morning, until the southerly storm rose about noon. During all this time they had as much opportunity to get a launch as the road; and they must have understood that if they did not act, no one would. Therefore, if they were under any duty to protect their property, and if their failure affected their rights, the facts put them in default.

It may seem a harsh rule that a man shall not recover for an admitted wrong, if he does not put himself to expense and trouble to fend against the threatened damage; yet when the inconvenience is trivial, this is the basis of those numberless eases which 'bar recovery when the sufferer has failed to protect himself after notice of danger. In the end the line must be found in the extent of the burden so imposed. If it be a question merely of turning one way or the other, he may not obstinately persist, and charge another for his injury. Grave dangers require easy precautions, even by those wronged. We have often applied that doctrine to tug and tow. The M. E. Luckenbach (D. C.) 200 F. 630, affirmed (C. C. A.) 214 F. 571; The Britannia (C. C. A.) 252 F. 583; The Coleraine (D. C.) 179 F. 977, affirmed (C. C. A.) 185 F. 1006; American, etc., Co. v. N. Y. (C. C. A.) 33 F.(2d) 97. These decisions all concerned slight efforts which nobody disputes that it is the duty of the. injured person" to make. The question here is whether the City and the company were called upon to hire a launch and tow away the barge. There are a number of cases in which as much was required; they concern such things as fires, changes in the adjacent land, fences and stream pollution. Stuekemann v. Pittsburgh, 255 Pa. 307, 99 A. 906; Van Pelt v. Davenport, 42 Iowa, 308, 20 Am. Rep. 622; Shinn v. Smith, 80 Ark. 321, 97 S. W. 52; City of Lexington v. Chenault, 151 Ky. 774, 152 S. W. 939, 44 L. R. A. (N. S.) 301; Adams v. Clover Hill Farms, 86 Or. 140, 167 P. 1015; Wisconsin, etc., Co. v. Scott, 167 Ark. 84, 267 S. W. 780; Pribonic v. Fulton, 178 Wis. 393, 190 N. W. 190, 27 A. L. R. 281; Brown v. Brooks, 85 Wis. 290, 55 N. W. 395, 21 L. R. A. 255; Simpson v. Keokuk, 34 Iowa, 568; Illinois Central R. Co. v. McKay, 69 Miss. 139, 12 So. 447; Walrath v. Redfield, 11 Barb. (N. Y.) 368. At times a difference has been thought to exist if the tort was a trespass or a nuisance (Athens Mfg. Co. v. Rucker, 80 Ga. 291, 4 S. E. 885; Grant v. St. Louis, I. M. & S. R. Co., 149 Mo. App. 306, 130 S. W. 80); but if the exception be sound, it does not apply here. Heaney v. Heeney, 2 Denio (N. Y.) 625, holds the contrary in a case similar to that at bar, but the deci sion was explained in Walrath v. Redfield, supra, on the ground that the tort had been deliberate, though'the court had given no such reason. City of Richmond v. Cheatwood, 130 Va. 76, 107 S. E. 830, is also to the contrary, though again it is not perfectly clear that it might not have rested upon the fact that the plaintiff thought, or might have thought, that the defendant would remedy the wrong before it caused the second damage which was at issue. The ease at bar,seems to us to- fall within the principle of the bulk of these decisions, and the failure of the claimants to remove the barge on Tuesday and Wednesday to associate them equally with the road in resulting damage; they contributed to the injury.

A more perplexing question arises as to the effect of this neglect. The injury was on land over which the admiralty had no jurisdiction. Yet the District Court got jurisdiction because of the limitation proceeding. And so, had the suit been an action at law, the plaintiff’s contributory negligence would have been a complete defence; in the admiralty it results only in a division of damages. We, have to decide which rule applies here. It is well settled that where the wrong occurs in one jurisdiction, and action is brought in another, the rule of contributory negligence of the first governs. Illinois Central R. Co. v. Ihlenberg (C. C. A. 6) 75 F. 873, 34 L. R. A. 393; Long v. Atlantic, etc., R. Co., 238 F. 919 (C. C. A. 4); Caine v. St. Louis, etc., R. Co., 209 Ala. 181, 95 So. 876, 32 A. L. R. 793; Louisville & N. R. Co. v. Whitlow’s Adm’r, 43 S. W. 711, 19 Ky. Law Rep. 1931, 41 L. R. A. 614; East Tennessee, etc., R. Co. v. Lewis, 89 Tenn. 235, 14 S. W. 603; Fitzpatrick v. International Ry. Co., 252 N. Y. 137, 169 N. E. 112, 68 A. L. R. 801. The law of the place where the tort occurs also controls the extent of the recovery. Slater v. Mexican National R. Co., 194 U. S. 120, 24 S. Ct. 581, 48 L. Ed. 900; Northern Pac. R. Co. v. Babcock, 154 U. S. 190, 14 S. Ct. 978, 38 L. Ed. 958; The Eagle Point, 142 F. 453 (C. C. A. 3). The same is true of more truly procedural issues (Central Vermont R. Co. v. White, 238 U. S. 507, 35 S. Ct. 865, 59 L. Ed. 1433, Ann. Cas. 1916B, 252), at least when a statute is concerned. Galef v. U. S. (D. C.) 25 F. (2d) 134, is not to the contrary; it turned upon the fact that both parties were Americans, though whether that be a good distinction we need not decide. The same rule applies to suits in the admiralty under death statutes of a state, drawn after Lord Campbell’s Act. The City of Norwalk (D. C.) 55 F. 98, affirmed (C. C. A.) 61 F. 364; Robinson v. Detroit, etc., Co., 73 F. 883 (C. C. A. 6); Quinette v. Bisso (C. C. A. 5) 136 F. 825, 5 L. R. A. (N. S.) 303; O’Brien v. Luckenbach S. S. Co., 293 F. 170 (C. C. A. 2); Truelson v. Whitney, etc., Co., 10 F.(2d) 412 (C. C. A. 5). The statute is considered as imposing the limitation as a condition upon the right.

However, it was held in Belden v. Chase, 150 U. S. 674, 14 S. Ct. 264, 37 L. Ed. 1218, that when action is brought at law in a State court for a collision upon navigable waters the plaintiff loses, if himself negligent. This has been often followed. Johnson v. U. S. Shipping Board Emergency Fleet Corp., 24 F.(2d) 963 (C. C. A. 2); Puget Sound Nav. Co. v. Nelson, 41 F.(2d) 356 (C. C. A. 9); Maleeny v. Standard Shipbuilding Corp., 237 N. Y. 250, 142 N. E. 602; Kalleck v. Deering, 161 Mass. 469, 37 N. E. 450, 42 Am. St. Rep. 421; Smith v. Norfolk & S. R. Co., 145 N. C. 98, 58 S. E. 799,122 Am. St. Rep. 423. Dicta of our own in Roebling’s Sons v. Erickson (C. C. A.) 261 F. 986, Storgard v. France & Canada S. S. Corp. (C. C. A.) 263 F. 545, and Port of New York Stevedoring Corp. v. Castagna, 280 F. 618 (C. C. A. 2) we overruled in Johnson v. U. S. Shipping Board Emergency Fleet Corp., supra. Conversely, it is well-settled that when the libellant sues in the admiralty upon a tort arising within the territorial waters of a State, his contributory negligence does not defeat him altogether; he need only divide his damages. Atlee v. Packet Ce., 21 Wall. 389, 22 L. Ed. 619 ; The Max Morris, 137 U. S. 1, 11 S. Ct. 29, 34 L. Ed. 586. We can see no escape therefore from concluding that as between a common-law court and a court of admiralty the question is treated as one of procedure, though in general the law is otherwise. It must be the same in the ease of a tort over which the admiralty gets jurisdiction only by virtue of the limitation statute. Until Southern Pac. Co. v. Jensen, 244 U. S. 205, 37 S. Ct. 524, 61 L. Ed. 1086, L. R. A. 1918C, 451, Ann. Cas. 1917E, 900, it was usually understood that liabilities arising from acts taking place in territorial waters depended upon the law of the State. That case, together with Chelentis v. Luckenbach S. S. Co., 247 U. S. 372, 38 S. Ct. 501, 62 L. Ed. 1171, and the cases which have since followed, have, however, established it that the maritime law alone creates them. Several of the' decisions we have cited were after this change had come about, but they did not make a distinction. Nor indeed would it be material in any event. It was not suggested in The Max Morris that the liability there in suit was subject to divided damages because it was maritime, or that action would not be barred at law. Rather it was implied that the rule of the forum controlled. So too in Belden v. Chase it was assumed that the doctrine varied with the court. Nor can we see anything in Chelentis v. Luckenbach S. S. Co., looking otherwise. The cause of suit for cure and maintenance which' the court was discussing is quite separate from that for indemnity; it does not depend at all upon the ship’s fault, nor on the seaman’s freedom from negligence. It is not a limitation upon a common-law, or maritime, liability, peculiar to a court of admiralty. So far as we can find there is nothing in the books beyond our own overruled dicta which throws doubt upon Belden v. Chase. And so we hold, though we acknowledge the anomaly, that in a ease such as this the damages must be divided. Judge Soper reached the same result by a very different reasoning in U. S. v. Norfolk-Berkley Bridge Corp. (D. C.) 29 F.(2d) 115, 128-132, the only decision in point that we have found.

The wréek statute (33 USCA § 409) has no application and does not exonerate the road. We have indeed said [Red Star, etc., Co. v. Woodburn (C. C. A.) 18 F.(2d) 77], that it absolves the tug of injuries for which she might otherwise be liable; but certainly this does not occur until the opportunity for marking the wreck exists. Here the Hill was presumably half afloat, half aground, continuously pounding the walk till she went to pieces. It was impossible to treat her as a wreck and mark her; it would have served no purpose to do"so. The statute is not directed to such a situation, and it would pervert its meaning so to read it.

On the other hand, we cannot see that the doctrine of Pendleton v. Benner Line, 246 U. S. 353, 38 S. Ct. 330, 62 L. Ed. 770, and Luckenbach v. W. J. McCahan Sugar Refining Co., 248 U. S. 139, 39 S. Ct. 53, 63 L. Ed. 170,1 A. L. R. 1522, has anything to do with the case. Those decisions involved warranties of seaworthiness, and a warranty is an undertaking to pay the promisee if certain facts turn out to be otherwise than as the warrantor states. The warrantor is liable upon that promise without limitation, because his default — failure to pay — is personal. The Number 34, 25 F.(2d) 602, 607 (C. C. A. 2). A bailee on the- other hand promises to use all reasonable efforts to return the vessel, but it is his agent who defaults, not he, if she be not properly guarded. The lee King, 261 F. 897 (C. C. A. 2); The Soerstad (D. C.) 257 F. 130. Were he to promise at all hazards to return her, he might well bé outside the protection of the statute.

We think that the salvage awards to the Hughes were too small. We raise the total of $450 to $1,350 to be divided in the same proportion and charged against the barges in rem. The Hughes was not at the time employed by, or working for, the petitioner.

The decree is reversed, and the cause remanded with directions to allow limitation as to all the barges except the Hill; to give full damages in personam for it and half damages for the damage done to the Boardwalk after Monday; and to award a lien of salvage in favor of the Hughes. The questions which may arise as to the marshalling of the proceeds of the “Brinton” among all the claimants have not been argued and we reserve them. In any case, they more properly arise upon final decree.


source: Caselaw Access Project

author: L. HAND, Circuit Judge.

license: Public Domain

text:
    OLTARSH v. BRATTER et al.
    No. 314.
    Circuit Court of Appeals, Second Circuit.
    April 6, 1931.
    Hartman, Sheridan, Tekulsky & Pecora, of New York City (Charles A. Winter, of New York City, of counsel), for appellants.
    Joseph Sterling, of New York City, for appellee.
    Before MANTON, L. HAND, and CHASE, Circuit Judges.
   L. HAND, Circuit Judge.

The plaintiff sued the defendants for the breach of a contract by which he was to receive twenty-five thousand dollars and certain shares of stock, in consideration of his procuring for them a plot of land, securing a loan upon it of $900,000, and preparing plans for. and supervising the erection of, a building which should contain a moving picture theatre. The plaintiff’s evidence permitted the jury to find that he had secured the plot and perhaps the loan as well, and was by way of proceeding with the project when the defendants told him that they could not complete and repudiated the contract. Thereupon, according to his story, they suggested to him that he try to procure a lease of the land, the owners to erect the building, and the defendants to be lessees at a specified rental. This proposal the defendants' agreed should not terminate the existing obligations; and in any event, in case they bought the land, or leased it, the plaintiff should have his pay quite as though they had gone on with the original agreement. Coneededly, the plaintiff failed to get the lease from the owners for the defendants, who thereafter bought the land themselves and put up the building without the plaintiff’s help. The breach assigned was this elimination of the plaintiff from the transaction.

The defendants’ evidence was that the plaintiff had never obtained the loan, and that he announced his inability to proceed at the interview when the question of a lease arose. They said that at that time he entered into a contract with them, to buy the property himself, put up the building at:'his own cost and lease it to them, he to have the rent and a quarter interest in the lessee 'corporation. In confirmation of this ‘ they relied upon a written contract by which they, acting in the name of a corporation which they controlled, promised to accept a lease from the plaintiff of such a theatre to be put up according to his plans and specifications, at a rental of $45,000. This was on March fifth, the same day on which the plaintiff said that he had agreed tentatively to try to get a lease for them from the owners. In a letter written on March eighth to the defendants’ representative, the plaintiff wrote as follows: “I do not know whether you were told by Bratter and Poliak, but the other day when I was there I finally agreed with them to give them a lease on the property and they agreed to enter into such a lease for a specific amount. I do not know how well you know them, but I am afraid after I have the land purchased and have my deal closed, I may run into a snag and find myself with the land and the theatre and they not properly tied np in the financial way.”

The District Judge left it to the jury to say whether the parties had abandoned the original agreement and substituted the agreement by which the plaintiff was to give the defendants a lease. If so, there could be no recovery; if not, the jury might find that the original contract continued, and the defendants were liable. The jury found for the plaintiff and the defendants appealed.

We need only consider the exception to the sufficiency of the proof at the close of all the evidence. The ease failed, if it then appeared that the original contract had been abandoned, and that in its place there remained only the agreement that the plaintiff should procure the land, build the theatre and give the defendants a lease. The plaintiff had not pleaded such a cause of action and made no effort to prove that he could have procured the land from the owners, or built the theatre. Even though the defendants deprived him of his opportunity to do so by. stepping behind him before his túne was up, that did not dispense with some proof that he would himself have been able to perform, New York Trust Co. v. Island Oil & Transp. Corp., 34 F.(2d) 653 (C. C. A. 2). He could therefore recover only on the theory that the original contract continued, and indeed it was on this that he relied.

It was conceivable that the second agreement should have been tentative, a substitute only in ease the plaintiff could buy the land and finance the project; and in the event of the plaintiff’s failure to do so, that the defendants were to remain liable upon the original contract. But neither the offer of March fifth, nor the plaintiff’s letter of March eighth, suggested anything of the sort. We infer little or nothing from the offer, which might indeed contain no reference to the situation in ease the agreement broke down; but it seems to us most unlikely that the plaintiff should have used the language he did in the letter of March eighth, if the agreement was conditional upon his success. When he wrote, “I finally agreed with them to give them a lease on the property, and they agreed to enter into such a lease,” it was scarcely the language of one who has done no more than agree to try to extricate the other party from a contract which has become onerous. Clearly the two' contracts, if “finally agreed” upon, could not exist side by side; the owners could not at once sell the property to the defendants, and the plaintiff buy it and give them a lease. The plaintiff might still be entitled to more than the prescribed rental, indeed, to his original compensation; but his performance was not the same, and he could earn his pay only in ease he performed.

But though the letter of March eighth be not alone a sufficient contradiction of the possibility that the actual agreement of March fifth was conditional on the plaintiff’s success in getting the land himself and putting up the building, he said nothing of such a condition. He did not assert that he had tenta^ tively agreed to buy the property, put up the building, and lease it to the defendants, meanwhile reserving his rights in the case of his failure. According to his version, he was only to act as an intermediary between the defendants and the owners in getting them to put up the building and give the lease. That was quite a different transaction. That version the documents conclusively contradicted; we may say positively that no such arrangement was ever made between the parties, and no jury which understood their import could have so concluded. With this testimony eliminated, there remained only the defendants’ own testimony and the documents themselves, and there was nothing to show that the second contract was conditional upon the plaintiff’s success in getting the land and putting up the building. The jury was certainly not entitled to read the plaintiff’s testimony as referring to the agreement actually made, even if the letter of March eighth was not a sufficient contradiction, were it so read. The defendants should have had a directed verdict.

Judgment reversed; new trial ordered.


author: SAWTELLE, Circuit Judge.

text:
    ARMENTA v. UNITED STATES.

    No. 6237.
    Circuit Court of Appeals, Ninth Circuit.
    March 30, 1931.

      Wm. J. Fellows and John W. Bay, both of Phoenix, Ariz., for appellant.
    John C. Gung’l, U. S. Atty., of Tucson, Ariz., J. S. Wheeler, Asst. U. S. Atty., of Phoenix, Ariz., and B. G. Thompson and Norman S. Hull, Asst. U. S. Attys., both of Tucson.
    Before BUDKIN, WILBUR, and SAWTELLE, Circuit Judges.

      Rehearing denied May 11, 1931.

   SAWTELLE, Circuit Judge.

Appellant, hereinafter called the defendant, was convicted upon counts 3, 4, and 5 of an indictment, in which counts he was charged with the unlawful possession and sale of intoxicating liquor and maintaining a common nuisance. Pursuant to the verdict of the jury the court announced sentence: “That the said defendant be imprisoned in the United States Penitentiary at McNeil Island, in the State of Washington, for the period of three (3) years on count four, said term of imprisonment to date from his delivery to the warden of said penitentiary; that said defendant be fined in the sum of three thousand dollars ($3,000.00) on count four; that he be fined the sum of five hundred dollars ($500.-00) on count three, and that he be fined the sum of one thousand dollars ($1,000.00) on count five; that in default'of payment thereof he stand committed to said penitentiary» until said fines are paid or he is otherwise discharged by law, said commitment in default of payment of said fines to. run concurrently with each other and to date from the expiration of the term of imprisonment imposed under said count four.”

On the following day, April 11, 1930, as shown by the minutes of the trial court, the defendant being present with his counsel, this judgment was vacated and the following judgment entered: “That said defendant be imprisoned in the United States Penitentiary at McNeil Island, in the State'of Washington, for the period of three (3) years on count three; said term of imprisonment to date from his delivery to the warden of said penitentiary; that said defendant be fined the sum of three thousand dollars ($3,000.00) on count three; that he be fined the sum of five hundred dollars ($500.00) on count four; that he be fined the sum of one thousand dollars ($1,000.00) on count five; that in default of payment thereof he' stands committed to ' said penitentiary until said fines are paid or he is otherwise discharged by law, said commitment in default of payment of said fines to run concurrently with each other andi to date from the expiration of the term of imprisonment imposed under said count three.”

The record contains a “proposed bill of exceptions” which evidently was not presented to the judge of the trial court for his approval, as required by law and by the rules of court. In any event, it is not signed and properly authenticated, and therefore cannot be considered by this court.

Counsel for the defendant relies upon and argues four assignments of error:

“I. That the court erred in denying or ignoring the defendant’s motion to suppress evidence obtained during a search and seizure by said federal prohibition agents, which evidence was used at the trial of said defendant.
“II. That the court erred in demanding of the defendant that he produce a certain affidavit, the contents of which were highly prejudicial to the defendant.
“III. That the argument of counsel for the Government and the comment of the court during the course of the trial were highly prejudicial to the defendant. .
“IV. That the court erred in denying the motion in arrest of judgment macle by the defendants.”

Assignment I relates to the ruling of the court on the defendant’s motion to suppress certain evidence obtained during the search of defendant’s residence by federal prohibition officers. In the absence of the bill of exceptions this ruling is not open for review. In the case of Doran v. United States, 31 F. (2d) 754, 755, Judge Dietrich, speaking for this court' said: “A motion seasonably made for the suppression of part of the evidence, on .the ground that it was obtained through an unlawful search, was heard upon affidavits and oral testimony prior to the trial, and denied. ' The testimony so adduced is not brought here by bill of exceptions or otherwise, and the order is therefore not open for review.” See, also, Beach v. United States, 35 F.(2d) 837 (C. C. A. 9th); Lockhart v. United States, 35 F.(2d) 905 (C. C. A. 9th); Sapp v. United States (C. C. A.) 35 F.(2d) 580.

Assignments II and III relate to alleged errors of the court, and counsel for the government during the course of the trial. For the reasons just stated these assignments are likewise not open for review.

Assignment IV relates to the ruling of the court on defendant’s motion in arrest of judgment, and is the only one properly before us for review. .As above stated, upon the return of the verdict the court sentenced the defendant to imprisonment in the United States Penitentiary at McNeil Island in the state of Washington for a- period of three years and imposed a fine of $3,000 on count 4 of the indictment. This sentence was urn-authorized both as to the term and place of imprisonment. Count 4 of the indictment charges the defendant merely with a misdemeanor, namely, the unlawful possession of intoxicating liquor, and the court in imposing the Sentence undoubtedly was laboring under the impression that count 4 was the count charging the sale of intoxicating liquor. On-the following day and during the same term of court the court, over the defendant’s objection, vacated the judgment and sentence and imposed the same judgment and sentence under count 3, the sales count, and at the same time imposed a fine of $500 under count 4, the possession count. Counsel for the defendant contends that “the above sentences were legal tho the one was excessive, to-wit: the sentence on the fourth (4th) count, but it has been held that where a sentence is excessive it does not render the judgment void except, as to the excess,” and he argues that, as to the excess, defendant’s sentence should be modified by this court. We agree with counsel that all of the sentences were legal, except the sentences under count 4. It is true that this sentence is merely excessive in so far as the amount of the fine is concerned, but it is void in other respects. It must be remembered that the fourth count charged the defendant with the commission of a misdemeanor, and that upon conviction thereof the court sentenced him to pay a fine and to be imprisoned in the penitentiary for the term of three years.

A misdemeanor is an offense which may be punished by imprisonment for a term not exceeding one year. 35 Stat. 1152, 18 USCA § 541. There is, consequently, no escape from the conclusion that the judgment of the court sentencing the defendant to imprisonment in the penitentiary was in violation of 'the statutes of the United States.

“The court below was without jurisdiction to pass any such sentences, and the orders directing the sentences of imprisonment to> be executed in a penitentiary are void. This is not a case of mere error, but one in which the court below transcended its powers. Ex parte Lange, 18 Wall. 163, 176 [21 L. Ed. 872]; Ex parte Parks, 93 U. S. 18, 23 [23 L. Ed. 787]; Ex parte Virginia, 100 U. S. 339, 343 [25 L. Ed. 676]; Ex parte Rowland, 104 U. S. 604, 612 [26 L. Ed. 861]; In re Coy, 127 U. S. 731, 738, 8 S. Ct. 1263 [32 L. Ed. 274]; Hans Nielsen, Petitioner, 131 U. S. 176,182, 9 S. Ct. 672 [33 L. Ed. 118].” In re Mills, 135 U. S. 263, 270, 10 S. Ct. 762, 764, 34 L. Ed. 107.

The Supreme Court in speaking of the penitentiary sentence said: “That is a sentence which can only be imposed- where it is specifically prescribed, or where the imprisonment ordered is for a period longer than one year, or at hard labor.” In re Bonner, 151 U. S. 242, 254,14 S. Ct. 323, 324, 38 L. Ed. 149.

The National Prohibition Act (c. 85, Title 2, § 29, 41 Stat. 316, 27 USCA § 46) prescribes the punishment for the first offense of the crime of possessing intoxicating liquor a fine not exceeding $500.

“It follows that the court had no jurisdiction to order an imprisonment, when the place is not specified in the law, to be executed in a, penitentiary, when the imprisonment is not ordered for a period longer than one year, or at hard labor. The statute is equivalent to a direct denial of any authority on the part of the court to direct that imprisonment be executed in a penitentiary in any cases, ■other than those specified.” In re Bonner, supra.

In the same ease the court quotes from In re Mills, 135 U. S. 263, 10 S. Ct. 762, 34 L. Ed. 107, as follows: “ ‘A sentence simply of' “imprisonment,” ’ said the court, ‘in the case of a person convicted of an offense against the United States, where the statute prescribing the punishment does not require that the accused shall be confined in a penitentiary, cannot be executed by confinement * * * “for a period longer than one year.” ’ ”

It will thus be seen that the trial court in the instant case was without jurisdiction to sentence defendant to imprisonment in the penitentiary under the fourth count of the indictment. See, also, Ex Parte Lange, 18 Wall. 163, 21 L. Ed. 872. The court being without jurisdiction to impose a penitentiary sentence in the first instance, it was within its power and jurisdiction during the same term to vacate the sentence and impose a valid one, especially in view of the fact that the judgment specifies that the defendant’s term of imprisonment dates from his delivery to the warden of the penitentiary, and that no part of the sentence had been executed. The Supreme Court in the ease of Goddard v. Ordway, 101 U. S. 745, 752, 25 L. Ed. 1040, said: “In Ex parte Lange (18 Wall. 163, [21 L. Ed. 872]), we said that ‘the general power of the court over its own judgments, orders, and decrees, in both civil and criminal cases, during the existence of the term at which they are first made, is undeniable.’ Bassett v. United States, 9 Wall. 38 [ 19 L. Ed. 548]; Doss v. Tyack, 14 How. 297 [14 L. Ed. 428]. As part of the ‘roll of that term,’ they are deemed to be ‘in the breast of the court during the‘whole term.’ Bac. Abr., tit. Amendment and Jeofail, A.”

“As a general practice, the sentence, when imposed by a court of record, is within the power of the court during the session in which it is entered, and may be amended at any time during such session, provided a punishment already partly suffered be not increased.” Wharton, Criminal Pleading and Practice (9th Ed.) § 913.

“A sentence * * * ¿loes not commence until the person sentenced is taken to the prison.” Dimmick v. Tompkins, 194 U. S. 540, 24 S. Ct. 780, 48 L. Ed. 1110.

In the instant ease, at the time the defendant was resentenced he had not begun the service of his original sentence, and therefore no question of jeopardy or double punishment is here involved.

The judgment of the lower court is affirmed.


author: MANTON, Circuit Judge.

text:
    ANONYMOUS, an Attorney, v. TRENKMAN et al.
    No. 255.
    Circuit Court of Appeals, Second Circuit.
    April 6, 1931.

      I. T. Matto, of New York City, for appellant.
    H. Snowden Marshall, of New York City, for appellees.
    Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
   MANTON, Circuit Judge.

Appellant is an attorney at law, and sued for damages, alleging he was libeled by reason of allegations contained in a complaint filed to set aside an order of settlement and discontinuance, of- an aetion, wherein he was named as defendant, which discontinuance was entered December 24, 1924, in a cause involving the appellee Beatrice P. Trenkman, appellee Henry M. T. Beekman appearing as attorney. The basis of the suit-to set aside the discontinuance was duress-The suit, which was compromised and discontinued, was a litigation over the disposition of the estate of William E. Smith. It. was claimed that Smith was induced by fraud and force to marry one Clair Smith; that he was in an impaired mental condition; that he- executed a last will and testament which, was obtained by fraud and undue influence;, that deeds, conveyances, and assignments were made which were also fraudulent and the-suit sought to enjoin the defendants therein named from transferring, conveying, or otherwise disposing of the property. Appellant is named as a party defendant in that action. The case was compromised by payment of a substantial sum of money, and the aetiondiscontinued as stated. The twentieth paragraph of the complaint, served in the action-to- set aside the settlement and discontinuance, contained the following:

“That since said settlement, the-plaintiff has obtained evidence which leads her to believe, and she alleges on information and belief, that the death of said William E. Smith was brought about by the defendants, pursuant to their fraudulent plan and conspiracy hereinabove set forth.”

The present complaint was dismissed on-motion. For the purpose of testing the sufficiency of this complaint, the appellees are deemed to have conceded the truth of the allegations thereof which, of course, allege the falsity of the statements contained in the twentieth paragraph charging the appellant, in substance, with causing the death of William E. Smith.

That the allegations are libelous and actionable, unless privileged, admits of little doubt, for they in effect charge the defendant with crime. Morrison v. Smith, 177 N. Y. 366, 69 N. E. 725; Krug v. Pitass, 162 N. Y. 154, 56. N. E. 526, 76 Am. St. Rep. 317; O’Connell v. Press Publishing Co., 214 N. Y. 352, 108 N. E. 556. The cause of death of William E. Smith and.how it.was brought about as alleged in the complaint, was not material or relevant to the question of the right to vacate the discontinuance and settlement. This aetion to vacate the discontinuance was instituted four years after the order of discontinuance was entered upon stipulation of the parties. The plaintiff in the action to vacate the discontinuance also prayed for the vacating of the probate of the will of William E. Smith. Only the Surrogate’s Court of New York County had jurisdiction as to this. Pyle v. Pyle, 137 App. Div. 568, 122 N. Y. S. 256, affirmed 199 N. Y. 538, 92 N. E. 1099; Bowden v. Owen, 103 Misc. Rep. 56, 61, 171 N. Y. S. 778, affirmed 227 N. Y. 612, 125 N. E. 913. The New York courts have applied two tests of relevancy depending upon the facts of the particular ease. Where a libel occurs in a preliminary pleading and is directed at one not a party to the cause, the privilege will be granted only if the allegation is one of the ultimate facts on which the pleader relies. Moore v. M. N. Bank, 123 N. Y. 420, 25 N. E. 1048, 11 L. R. A. 753. In that ease, a former teller sued the bank for libel. The libel was contained in a statement of claim and bill of particulars, presented by the bank in an action against sureties on a cashier’s bond, and containing a list of items stolen by the cashier, including certain amounts said to have been drawn out “by collusion with the teller.” The court held that the libel was not privileged because irrelevant and had nothing to do with the surety’s liability to the bank; apparently it served no purpose to inform them of the teller’s collusion with the cashier, and hence until the bank adduced proof of its relevancy it was not privileged. In Lesser v. International Trust Co., 175 App. Div. 12, 161 N. Y. S. 624, a petition in bankruptcy referred to one lesser as the recipient of certain assets and characterized him as a “fugitive from justice.” This was held not to be privileged. In Battu v. Smoot, 211 App. Div. 101, 206 N. Y. S. 780, a libel suit was brought by an officer and director of a corporation against a former employee. The employee had been hired under a contract by whose terms he had agreed to assign certain patents and not to compete in like business, and, as compensation, he received stock in the company. The company sued for breach of this contract, and in his answer he set up the fact that the officers and directors had conspired to control the company and monopolize the profits to his exclusion; that they did this by paying excessive salaries and in some eases through dummy employees. This was held not to be privileged, since no relief was asked against the officers and directors and since his grievance as a stockholder had nothing to do with the breach of contract issues. These eases were followed in the federal court in Union Mutual Life Ins. Co. v. Thomas, 83 F. 803 (C. C. A. 9). The life insurance company denied the death of the insured and also set up in its answer that the plaintiff and the attorney had no cause to believe him dead and had conspired to defraud the company. It was held that this statement was not privileged as against the attorney. The court said that the allegation of plot added nothing to the allegation that the insured was alive, and so was irrelevant. In Union Mutual Life Ins. Co. v. Thomas, 83 F. 803, 804 (C. C. A. 9), it is said: “It is perhaps not necessary'that it be in all eases material to the issues presented by the pleadings, but it must be legitimately related thereto, or so pertinent to the subject of the controversy that it may, in the course of the trial, become the subject of inquiry.”

King v. McKissick, 126 F. 215 (C. C. Dist. Nevada), involved a petition to perpetuate testimony which alleged that the adverse claim was being made because of the false, fraudulent, and malicious representations of one E. D. King to the claimants. This was held not privileged, as it was of no consequence why the claim was put forth. See, also, Potter v. Troy, 175 F. 128 (C. C. S. D. N. Y.). The rule was stated in Harlow v. Carroll, 6 App. D. C. 128, 139; that the “matter, to which the privilege does not extend, must be so palpably wanting in relation to the subject-matter of controversy as that no reasonable man can doubt its irrelevancy and impropriety.”

Here the issue presented by the pleadings in the suit to set aside the compromise and discontinuance was the claim to rescind because the compromise was procured by fraud. The murder of Smith was not relevant to that issue. It is true that in the bill the vacation of probate is also asked for, but that was a matter for the Surrogate’s Court; the state Supreme Court not having jurisdiction. Moreover, such a cause of action would not be against this appellant, but against the legatee. The rule is stated in Andrews v. Gardiner, 224 N. Y. 440, 445, 121 N. E. 341, 2 A. L. R. 1371, that counsel are privileged with respect to any statements, oral or written, made in judicial proceedings and pertinent thereto, and that in England the im-° munity is broader. There the privilege exists whether the statements are relevant or not, but the American rule is that the privilege is lost if the libel is irrelevant. Youmans v. Smith, 153 N. Y. 214, 47 N. E. 265; Moore v. Manufacturers’ Nat. Bank, supra; McLaughlin v. Cowley, 127 Mass. 316; Barnett v. Loud, 226 Mass. 447, 115 N. E. 767; Kemper v. Fort, 219 Pa. 85, 67 A. 991, 13 L. R. A. (N. S.) 820, 123 Am. St. Rep. 623, 12 Ann. Cas. 1022. Under the law of New York and the federal law, if the lihelous matter is malicious and irrelevant, it ceases to be privileged. White v. Nicholls, 3 How. 266, 11 L. Ed. 591; Potter v. Troy (C. C.) 175 F. 128. The pleadings should contain but the plain and concise statements of the material facts and not the evidence by which they are to be proved. Civil Practice Act, § 241. If a pleader goes beyond the requirements of the statute and alleges an irrelevant matter which is libelous, he loses his privilege. The appellees are charged with willfully — the one swearing to, and the other as attorney drafting — libelous allegations which are irrelevant to the issue in that suit, for they did not touch the issues which the parties had made by their pleadings. They are alleged in the present bill of complaint to be false, untrue, and willfully made. If this be established, the libel is actionable.

Order and judgment reversed.


author: MACK, Circuit Judge.

text:
    QUEENSBORO NAT. BANK OF CITY OF NEW YORK v. KELLY.
    No. 258.
    Circuit Court of Appeals, Second Circuit.
    April 6, 1931.

      See, also, 15 F.(2d) 395.
    Samuel Perlo, of New York City, for appellant.
    Ignatius A. Seannell, of New York City, for appellee.
    Before L. HAND, CHASE, and MACK, Circuit Judges.
   MACK, Circuit Judge.

In an action against the maker by the payee of a promissory note for $14,432.63, defendant answered that the consideration therefor was an assignment by plaintiff to him of certain bills of exchange aggregating $16,164.15; that the note was to be effective on condition that the bills were delivered to defendant, but that no delivery had been made; that, on the contrary, when at matur-ity defendant had tendered the amount of the note with interest, plaintiff had informed him that it was unable to deliver the drafts; that all or a greater number of the drafts had been paid prior to the assignment to defendant.

Of even date with the note, but whether before or after its execution is in controversy, a writing was signed by both parties (copied in the margin).

It was stipulated at the trial that prior to the execution of the note some of the drafts had been paid by the drawees thereof to a Porto Rican bank, plaintiff’s correspondent; that the moneys received had been remitted by it, $9,189.21 thereof to the drawer, Soamer Distributing Company, which deposited the cheeks with plaintiff, in its general account, and the balance, $1,067.51, directly to plaintiff.

The drafts had. been issued in sets of two. This, however, is about all that on this record can be stated in respect to them. In other words, it is not clearly apparent (a) who the payee was, whether the drawer or plaintiff or the Porto Rican Bank; (b) whether they were delivered by the drawer to the plaintiff, and, if so, for what purpose; or (c) whether they were sent either by drawer or plaintiff to the Porto Rican bank, and, if so, whether the whole .or only part of either the firsts or the seconds of exchange or both were so sent; (d) whether sneh drafts as were in plaintiff’s possession at the time of the assignment were firsts or seconds or both, and whether they were originally payable to plaintiff or had theretofore been indorsed to it by the drawer or the Porto Rican bank as payee, or had been delivered to it without indorsement; and, if indorsed, what the nature of the indorsement was.

We deem it essential to point out this lack of clarity in the testimony in order that on another trial it may be corrected and the entire situation presented.

Inasmuch as at the conclusion of the trial both parties moved for a directed verdict and submitted the cause to the court on a stipulation that neither would ask to go to the jury but that the court might direct a verdict, all doubts in respect to the testimony must for the purposes of the present appeal be resolved against the appellant. Some time after the submission, the trial judge rendered an opinion stating that a verdict would be directed in favor of the defendant, but he made no special findings of fact. The judgment from which the appeal was • taken, after reciting the stipulation and the granting of defendant’s motion for a directed verdict, dismisses the complaint and awards costs to defendant. No exceptions were taken other than to the exclusion of evidence. In this situation, on this appeal, only errors of law in that respect may be considered. Beuttell v. Magone, 157 U. S. 154, 15 S. Ct. 566, 39 L. Ed. 654; Sena v. Am. Turquoise Co., 220 U. S. 497, 31 S. Ct. 488, 55 L. Ed. 559.

The question thus presented for review is whether or not the court erred in refusing to admit parol evidence that defendant knew the drafts to be worthless pieces of paper at the time of the execution of the assignment and that the actual or main consideration for the note was an agreement between defendant, for a long time president, and thereafter chairman of plaintiff’s board of directors, and his codirectors, to make good, in proportion to their stock holdings,- certain of the bank loans, pursuant to the National Bank Examiner’s direction that they be replaced because deemed by him unsafe. The relevancy of the rejected testimony is its tendency to negative the implication of any warranty by plaintiff as transferor of the drafts.

Although the drafts were drawn on Porto Ricans, as their assignment by plaintiff to defendant under the written document and their delivery either actual or constructive under the terms of that document or by the delivery of a paper listing them were completed in New York, the law of that state controls ; if statutory, this court accepts the state court’s interpretation, but, if not statutory, the federal court is not bound by the state court’s decisions on the common law or the law merchant as applied to such a Commercial transaction.-

We .are dealing with negotiable instruments; as heretofore stated; on the record before us, it is uncertain whether at the time of the transfer the drafts were order or bearer paper. This can be cleared up on the new trial. If it shall then appear that in plaintiff’s hands they were bearer paper, the transfer is clearly within the provisions of the New York Negotiable Instruments Law (Consol. Laws, c. 38); they were “negotiated” within section 60 of that act. The implied warranties, if any, arising out of the transaction, will be those specified in section 115. If, however, it shall appear that they were then order paper, inasmuch as they were not indorsed by plaintiff, they were not in the strict sense of the term negotiated. The question then arises whether in these circumstances the Negotiable Instruments Law covers the transaction so that section 115 determines the implied warranties, or whether the transfer is to be dealt with as an assignment at common law. The importance of the matter is due to the conflict between Meyer v. Richards, 163 U. S. 385,16 S. Ct. 1148, 41 L. Ed. 199, holding that the transferor warrants the instrument to be valid, and Littauer v. Goldman, 72 N. Y. 506, 28 Am. Rep. 171, holding that the transferor warrants only that he has no knowledge of any invalidity.

Section 79 of the New York Negotiable Instruments Law expressly governs the ease of delivery, without indorsement, of order paper. Whatever the situation at common law, such a transfer vests the title of the transferor in the transferee, and the latter “acquires, in addition, the right to have the indorsement of the transferrer.” This section further provides “but for the purpose of determining whether the transíerree is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.” While, therefore, for the one specified purpose, actual indorsement is essential to complete the “negotiation,” the apparent legislative intent was to make the negotiation effective for other purposes as soon as the right to have the indorsement placed thereon was acquired.

Section 115 uses a similar word, “negotiating.” Narrowly interpreted, the applicability of this section might thereby be limited to order paper on which the qualified indorsement had actually been made. In our judgment, however, the legislative intent, evidenced by the provision of section 79, will be effectuated only by a more liberal interpretation, so as to cover the transfer of order paper before as well as after actual indorsement. As between the immediate parties to the transaction and in respect to the warranties, if any, that the transferor gives to his immediate transferee, no question of holder in due course is involved. Whether the assignment be before or after maturity, for value or as a gift, title to the paper and the right to demand the indorsement vest in the transferee at once. It follows, therefore, that, whether the drafts be bearer or unindorsed order paper, plaintiff at the best warranted under section 115 only against its own knowledge and not against the fact of invalidity.

As the warranties, if any, are not expressed in the assignment document or in any writing, either on the drafts or outside of them, whether they were bearer or unindorsed order paper, the warranties are only such as the law implies; in these circumstances, there is no varying of a written instrument by parol evidence in the admission of testimony tending to negative the implication of any warranty. Smith v. Barner, 95 Or. 486,188 P. 216. In that ease, in some respects similar to the instant one, the court was unanimous on this point; the only difference between the majority and minority was whether parol evidence of the actual transaction and intention would be admissible if (what was not clear on the record before the court) it should appear on the new trial that the order paper had in fact been indorsed “without recourse” and not merely •assigned and delivered. The minority in that case, as in Moody v. Morris-Roberts Co., 38 Idaho, 414, 226 P. 278, contended in well-reasoned opinions (approved by Chafee, Brannan’s Neg. Instr. Law [4th Ed.] p. 609; see Llewellyn, 29 Yale Law Journal 102, at 104, note 11) that the words “without recourse” on the instrument itself do not expressly embody in writing the warranties implied under the provisions of statutes identical with section 115 of the New York act, and that therefore the admission of such evidenee would not contravene the parol evidence rule. No such question, however, will arise here, for clearly, even if the drafts were order paper, they had not been indorsed at the time of their assignment.

The fact that the implied warranties of section 115 of the Negotiable Instruments Law are stated in absolute terms does not, in our judgment, preclude parol evidence of the transferee’s knowledge of invalidity. Both under the law of sales of chattels (1 Willis-ton. Sales §§ 219, 234) and under the law merchant before the N. I. A. (Baldwin v. Van Deusen, 37 N. Y. 487; Bell v. Dagg, 60 N. Y. 528; Coffman v. Allin et ux. Litt. Sel. Cas. [16 Ky.] 200; Beal v. Roberts, 113 Mass. 525; Porter v. Bright, 82 Pa. 441; Carroll v. Nodine, 41 Or. 412, 69 P. 51, 93 Am. St. Rep. 743), the purchaser’s knowledge of defects, proven normally by parol evidence, negatives the implication of the usual warranties as to such defects. See Britton, “Liability of Transferor by Delivery and a Qualified Indorser,” 40 Yale Law Jour. 215, 254, and 255, and cases cited. The tendered evidence of defendant’s knowledge of the “worthlessness,” that is, the invalidity, of the drafts by reason of their payment in whole or in part or the earlier negotiation of one of the sets and/or payment thereof, was therefore admissible to negative the statutory implication of a warranty by plaintiff; its exclusion was reversible error.

Proof of all the circumstances surrounding the transaction was likewise admissible to establish that these drafts were intended by both parties to be taken at defendant’s risk without any 'warranty, irrespective of defendant’s knowledge or lack of knowledge of specific defects. For this purpose, the offered proof of the parol agreement as an additional or even' main consideration for the note should have been received; its exclusion, too, was enrol’. Such evidence, if believed, tended to show that both parties re^ garded the drafts as worthless, and therefore intended no warranty to he implied. Clearly the assignment document did not in form or in fact express the entire understanding of the parties, as defendant himself asserts by pleading and offering evidence to show actual delivery of the drafts to he an express condition to payment of the note, although the document does not so provide. Moreover, its primary purpose was not to express a complete agreement between the parties. ' It is rather a grant, an assignment of the drafts, with a reservation of the right to apply collections thereon on defendant’s notes; incidental thereto is plaintiff’s unilateral promise to give the Soamer Company time on its unsecured indebtedness. Defendant’s signature is attached thereto, but it contains no promise by him to execute a note; the note is merely recited as the consideration for plaintiff’s assignment of the drafts and the extension of time.

If on the new trial the jury should ■disbelieve the rejected testimony, then, as heretofore stated, plaintiff’s warranty is that prescribed in section 115 of the New York Negotiable Instruments Law, not that the paper was “valid and subsisting,” but only that plaintiff as transferor “has no knowledge of any fact which would impair the validity of the instrument or render it valueless.” This limitation of the warranty is also adopted in other uniform Acts.

It will therefore not suffice for defendant to prove that the drafts or their negotiated counterparts, had. jn fact been paid; in order to establish 'this breach of warranty that gives him a set-off against his liability on the note, he must prove plaintiff’s knowledge of such payment. The third defense of payment of the draft is not a defense of failure of consideration for the note; there was no failure. The document passed title to the drafts and gave defendant the promise of time on the Soamer Company liability. But he may establish a set-off based on breach of 'warranty. It is to be noted that the third defense as pleaded fails to allege plaintiff’s knowledge of the payments. This defect may, however, in the discretion of the trial court, be obviated by amendment. In any event, proof of knowledge that one or more drafts had been paid gives a set-off only to that extent; all liability on the note is not thereby ended. See Ryan v. Security Savings Bank, 50 App. D. C. 292, 271 F. 366; New York Negotiable Instruments Law, § 54.

In respect to the second defense of tender of payment by defendant and plaintiff’s refusal to deliver the drafts, it is to be noted that the written tender made at maturity was not the tender as pleaded by him, conditioned only on delivery of the unpaid drafts in the sum of $16,164.15. There was added the further requirement, which was neither pleaded nor proved, that plaintiff also furnish proof “that neither the firsts nor seconds of exchange of said draft had been paid by the drawee.” There was, however, no contraetual or other obligation on plaintiff to furnish this proof as a condition to payment of the note.

For the errors in rejecting the offered testimony, the judgment must be reversed, and the cause remanded for a new trial.

       In consideration of the execution and delivery by William F. Kelly of a note for a term, of ten (10) months in the sum of Fourteen Thousand Four Hundred Thirty-Two Dollars and Sixty-three Cents ($14,432.63) dated this day, the Queensboro National Bank of the City of New York hereby assigns and sells to William F. Kelly drafts of the Soamer Distributing Company, Long Island City, N. Y., aggregating the sum of Sixteen Thousand One Hundred Sixty-Four Dollars Fifteen Cents ($16,164.15) with the privilege to the said William F. Kelly, to take legal action in such cases as he may be advised in the name of the Queensboro National Bank of the City of New York at his own expense and without recourse to the Bank. The said note to bear interest.
      It being understood, however, that in case the said William F. Kelly collects any monies on account of any draft or drafts hereby assigned, that that money shall be turned over to the Bank by the said William F. Kelly and such money turned over shall be in reduction of the said note and that the said William F. Kelly hereby assigns all such monies that may be collected on account of any draft or drafts hereby assigned.
      The Queensboro National Bank of the City of New York hereby agrees not to press the Soamer Distributing Company for more than One Hundred ($100) Dollars per month of the $3300 (Thirty-three Hundred Dollars) the said Soamer Distributing Company owes to the Bank that is not secured and is not contained in the said $16,164.15 heretofore assigned.
      In witness whereof the Queensboro National Bank of the City of New York has hereby caused its seal to be-affixed and these presents to be signed by its President, and William F. Kelly has hereto set his hand and seal this fourteenth day of July, 1925.
      Queensboro National Bank of the City of New York.
      By John La Duke, President.
      Wm. F. Kelly.
      [Seal.]
      In the presence of $
      Samuel Perlo.

       Cf. Liberty Trust Co. v. Tilton, 217 Mass. 462, 465, 105 N. E. 605, L. R. A. 1915B, 144, broadly defining “negotiated” to constitute a payee a bolder in due course.

       Sales of Goods Act, New York Personal Property Law (Consol. Laws, c. 41), § 117(c); Stock Certificates Act, Id. § 172(c); Warehouse Receipts Act, New York General Business Law (Consol. Laws, c. 20), § 128(c).


text:
    In re THURSTON.
    No. 279.
    Circuit Court of Appeals, Second Circuit.
    April 6, 1931.

      Single & Hill, of New York City (Forrest E. Single, of New York City, of counsel), for appellant.
    William F. Purdy, of New York City (John E. Purdy, of New York City, of counsel), for appellee.
    Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
   MANTON, Circuit Judge.

Appellant’s barge sank in the New York State Barge Canal. A marine insurance policy covering the barge provided that in the case of loss a survey should be made by surveyors, one appointed by each party, and, if they failed to agree, an umpire might be appointed pursuant to the United States'Arbitration Act, § 5 (9 USCA § 5). An umpire was appointed by the court. After a consideration, he'made specifications of the work required to repair the damage and stated how it should be done. The appellant moved to direct him to amend his report, and the appellee moved for a confirmation of the report as made. The order appealed from confirmed the report, but struck out therefrom the following paragraph:

“It is the opinion of the undersigned that the reasonable cost of foregoing recommended repairs will not exceed the sum of $5,889.-40, which is the actual financial loss which the assured has suffered by reason of damage sustained in the disaster for which the surveys were made.”

The appellant complains of the order confirming the report as modified.

The clause of the policy providing for the appointment of the umpire reads:

“If the surveyor appointed by these Insurers cannot agree with the surveyor appointed by the Assured upon an umpire, either party hereto may apply to the United States District Court for the District in which the home port of the vessel insured hereunder is located, for the appointment of an umpire pursuant to the United States Arbitration Act. The surveyors, or the umpire, if it shall become necessary to name one, shall make specifications in writing, clearly, stating both the amount of work and the manner in which it shall be done to make said vessel good in respect of any damage caused by the disaster. * s . * Such specifications shall be binding both upon the assured and these Insurers as to the extent of damage and the manner in which the work shall be done, subject, nevertheless, to the policy terms and conditions and the question of whether or not the disaster and resulting loss or damage are covered by this policy.”

In this manner, the parties to the policy of insurance in dispute, as to naming the umpire, agree to take advantage of section 5 of the United States Arbitration Act (section 5, title 9,'U. S. Code [9 USCA § 5]) by petitioning the District Court to appoint one. His duty was to determine the amount of the work and the manner in which it should be done and his determination, to be binding on both parties. By the stipulation of the parties, he was to make no award fixing the amount of damages. His report was solely for the purpose of determining how the repairs should be carried out, and had nothing to do with the amount of the ultimate liability. The specifications were to be binding as to both the assured and the insurer, “subject, nevertheless, to the policy terms and conditions and the question of whether or not the disaster and resulting loss or damage are covered by this policy.” Other provisions of the United States Arbitration Act were not made applicable by the parties.

They did not stipulate for arbitration under this act. But the court confirmed by order a report which recited the appointment of the umpire, the fact that a survey was made of the barge and the repair specifications noted, and recommended the various repairs to be made. No judgment could be entered on this report., Under the United States Arbitration Act § 8 (9 USCA § 8), provision is made for the entry of a decree upon the award “if the basis of jurisdiction be a cause of action otherwise justiciable in admiralty,” and “the party claiming to be aggrieved may begin his proceeding hereunder by libel and seizure of the vessel or other property of the other party according to the usual course of admiralty proceedings.” By section 9 of the act (9 USCA § 9) the decree might be entered if the parties had stipulated in their policy for arbitration and that judgment of the court should be entered upon the award made pursuant to the arbitration. But here the parties did not bring their dispute within either section 8 or section 9 of the act. On the contrary, as above pointed out, they stipulated that the report of the umpire would be conclusive upon them. The other sections of the United States Arbitration Act are inapplicable here.

Since the policy does not substitute arbitration for a suit under it, but provides for a board to determine the facts as found here, which shall be conclusive upon the parties (American Steel Co. v. German-American Fire Ins. Co. [C. C. A.] 187 F. 730; Toledo S. S. Co. v. Zenith Transp. Co., 184 F. 391 [C. C. A. 6]; Wurster v. Armfield, 175 N. Y. 256, 67 N. E. 584; Matter of Fletcher, 237 N. Y. 440, 143 N. E. 248), there was no jurisdiction in the court below to confirm this report.

The order will therefore be reversed, with directions to dismiss the petition for confirmation of the report. In re Woerner, 31 F. (2d) 283 (C. C. A. 2).

Order reversed.


author: NORTHCOTT, Circuit Judge.

text:
    STANDARD OIL CO. OF NEW JERSEY v. NEVILLE.
    No. 3116.
    Circuit Court of Appeals, Fourth Circuit.
    April 13, 1931.
    Thomas B. Jackson and Brown, Jackson & Knight, all of Charleston, W. Va., for appellant.
    M. M. Neely, of Fairmont, W. Va. (H. H. Rose, of Fairmont, W. Va., on the brief), for appellee.
    Before PARKER and NORTHCOTT, Circuit Judges, and WEBB, District Judge.
   NORTHCOTT, Circuit Judge.

This is an action of trespass on the ease, instituted in the circuit court of Marion county, W. Va., by Neville, administrator, plaintiff, against appellant, Standard Oil Company of New Jersey, defendant, for the alleged •wrongful death, of plaintiff’s decedent, Blair Idleman Neville, and removed by defendant to the United States District Court for the Northern District of West Virginia. Defendant pleaded the general issue to plaintiff’s amended declaration, charging defendant, through one of its agents, with negligence in causing the death of decedent in an automobile accident. Trial was had in October, 1929, resulting in a hung jury. A second trial was had in July, 1930, resulting in a verdict and judgment for plaintiff in the sum of $8,600, from which judgment this appeal is prosecuted.

The plaintiff’s decedent was killed in an automobile accident. When killed, he was driving his car with his brother, and his car was being followed closely by a ear driven by an agent of the Standard Oil Company. The car driven by decedent was unexpectedly stopped by colliding with an approaching car, when the ear driven by appellant’s agent struck the decedent, who had been thrown out of his ear, and killed him.

Two main questions are presented by appellant’s attorneys as to error committed in the trial. The first of these is the question of the admission of a statement of appellant’s agent made about forty-five minutes after the accident, when the agent had driven about ten or thirteen miles from the place where the accident happened; the statement being made to a man at a garage where the appellant’s agent had gone to have his ear examined. The statement made by the agent was to the effect that he had had a funny experience coming up the road a little while ago. There was an automobile wreck, and a man was killed, and that he thought he may have done it; that he was followup the other car, and said, “I shut my eyes and went through, I don’t know how I got through.”

The trial judge admitted this statement on the ground that it was a part of res geste. The question as to whether a statement is a part of the res geste depends on the circumstances of each ease, and there is no fixed rule by which the question can be decided. An examination of the authorities leads us to the conclusion that the statement made in the present case was too long after the happening and too much in the nature of a narrative of a past event to constitute a part of the res geste. 10 R. C. L. “Evidence,” §§ 161, 162, 169,173,174 ; 22 C. J. “Evidence,” pp. 451-469, §§ 543-557; Vicksburg & Meridian R. R. Co. v. O’Brien, 119 U. S. 99, 7 S. Ct. 118, 30 L. Ed. 299; Ambrose v. Young, 100 W. Va. 452,130 S. E. 810.

It is well settled that an agent may not, outside of his duties, make admissions against the interests of his principal that will bind the principal. Calzavaro v. Planet S. S. Corp. (C. C. A.) 31 F.(2d) 885.

It is also true, however, that, where a statement of this kind is improperly admitted, the error is rendered harmless when the facts contained in the statement are unquestionably proven by other evidence, and in this instance the agent himself went upon the stand and testified that, when the accident happened, he shut his eyes and went through, and also testified that he had stated to decedent’s father that he had found blood and hair upon his ear. In addition to this, it was thoroughly proven by other witnesses that it was the ear of the Standard Oil'Company’s agent that hit the man that was killed. In view of all this, we fail to see how the statement made by the agent-and admitted by the court below could have in any way prejudiced the ease of the appellant in the minds- of the jury. It is clearly established that error in receiving proof of a declaration is harmless, where the faet sought to be proved is established beyond doubt by other evidence. - 38 Cyc. 1419, et seq.; Gosh v. Lehigh & Wilkes-Barre Coal Company, 68 Pa. Super. Ct. 63; Lozier Automobile Exchange v. Interstate Casualty Company, 197 Iowa, 935, 195 N. W. 885; C. & O. Ry. Co. v. Ware, 122 Va. 246, 95 Si E. 183; Howell v. Wysor, 74 W. Va. 589, 82 S. E. 503, Ann. Cas. 1916C, 519; Chesapeake Stone Co. v. Holbrook, 168 Ky. 128, 181 S. W. 953, L. R. A. 1916D, 311; Smith v. St. Louis & S. F. R. Co., 96 Ark. 647, 132 S. W. 926; Van Eman v. Fidelity & Casualty Co., 201 Pa. 537,51 A. 177; Pensacola, etc., R. R. Co. v. Anderson, 26 Fla. 425, 8 So. 127.

The second question raised is as to the refusal of two instructions requested on. behalf of appellant in the trial below. An examination of these instructions leads us to the conclusion that they were properly refused, but, if they were not properly refused, the oral charge of the trial judge substantially covered the points raised in the instructions as far as they correctly stated the law. The charge of the trial judge was at 'least very fair to the appellant, and, if anything, went too far in his favor. Under these circumstances, it has been repeatedly held by this court that there is no reversible error. . Chesapeake & Ohio Ry. Co. v. Coffey (C. C. A.) 37 F.(2d) 320, and cases there cited.

There wás no prejudicial error; there was ample evidence to sustain the verdict of the jury; and the judgment of the court below is accordingly affirmed.


author: RUDKIN, Circuit Judge.

text:
    UNITED STATES v. RANES.

    No. 6332.
    Circuit Court of Appeals, Ninth Circuit.
    March 30, 1931.
    George J. Hatfield, U. S. Atty., and Hubert Wyckoff, Jr., Asst. U. S. Atty., both of San Francisco, Cal.
    Frederic C. Benner and Alvin Gerlack, both of San Francisco, Cal., for appellee.
    Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges.

      Rehearing denied May 11, 1931.

   RUDKIN, Circuit Judge.

This was an action on a converted policy of war-risk insurance in the sum of $7,000. After defining total and permanent disability, paragraph 11 of the Conditions, Benefits, and Privileges attached to the policy provides:

“The total permanent disability benefits may relate back to a date not exceeding six months prior to receipt of due proof of such total permanent disability, and any premiums paid after receipt of due proof of total permanent disability, and within the six months, shall be refunded without interest.”

The complaint contained no direct averment that due proof of total and permanent disability had been furnished to the Director of the United States Veterans’ Bureau, but did aver:

“That plaintiff, on January 22,1929; made application to the defendant, through its Veterans’ Bureau and the Director thereof, for the payment of said insurance for total and permanent disability and said Veterans’ Bureau, and the Director thereof have refused to pay plaintiff said insurance, and on April 26, 1929, disputed plaintiff’s claim to said insurance and disagreed with him concerning Ms rights to the same.”

This allegation of the complaint was admitted by the answer. Under such circumstances, and in the absence of a timely objection to the complaint, the above should be deemed a sufficient averment of the presentation of due proof of total and permanent disability as of the date alleged. Upon the trial, the jury returned a verdict in favor of the plaintiff, fixing the date of total and permanent disability as of October 1, 1928. Upon tMs verdict a judgment was entered for the sum of $644, representing accrued monthly installments at the rate of $40.25 per month, beginning October 1, 1928. From the judgment thus entered, the government has appealed.

The assignments of error challenge the sufficiency of the testimony to establish total and permanent disability, and the right or power of the court to give judgment for installments accruing more than six months prior to the date of the verdict. On the question of total and permanent disability, the testimony tends to prove that the appellee has suffered for a number of years from a disease known’as psoriasis. A physician testified that this is a disease of the skin, of unknown origin; that it usually involves certain parts of the body, and is regarded as chronic; that it disappears at times, but is subject to recurrence; that it is supposed by some to be due to blood parasites, and by others to be of nerve origin; that there are several cases on record where infection has been found; that he himself did not consider the malady contagious, .although it was so regarded by others; that the cure is more or less of an ephemeral nature; that in the majority of cases it can be cleared up in a month, but it sometimes takes six months or longer; that it is subject to recurrence, and there is no .assurance that it will not come back; that the longest time he has known a person to be free from it was seven years; and that it usually returns in two or three months. The appellee testified that the disease first appeared in the form of a scale, about May, 1922; that it spread from his face to his sealp; that at times his scalp is a solid crust; that now and then it spreads to all parts of his body; that his arms are practically covered with it; that at times it heals up for a short time only, but there has always been a few spots left. On the question of his ability to work, he testified that he has been unable to perform manual labor for a number of years last past; that he attended school and took a business course in vocational training; that in 1926 he was employed in a bakery in a clerical capacity; that after two weeks of work he was discharged because the drivers objected to coming in contact with him; that he then took a civil service examination, and .was employed in the post office in 1926 for a period of 1,-175 hours, and for about three days during the holidays in December of that year; that from October, 1927, to October, 1928, he was employed in the same capacity for 1,125 hours; that he was then discharged because his physical appearance was objectionable to other employees of the department; that since that time he has sought employment and has applied to numerous agencies to obtain employment, but has been unable to do so because of his appearance, and because others refuse to work or come in contact with him.

The testimony of the .appellee as to his physical appearance, his efforts to obtain employment, and his inability to do so is fully corroborated by other testimony. The case thus presented is in some of its aspects a peculiar one. The appellee is physically able to follow a substantially gainful occupation continuously, but is unable to obtain employment, through no fault of his own, because others are unwilling to associate or come in contact with him. The question of disability is a practical one, and upon the facts above outlined we think a finding of total and permanent disability was warranted.

Thus, in Wood v. United States (D. C.) 28 F.(2d) 771, 772, the insured was subject to epileptic seizures. The court found that he was a young man of excellent physique and much more than ordinary intelligence; that in the intervals between his seizures he was quite able to pursue successfully any number of substantially gainful occupations; that there was no evidence of any mental or physical deterioration; that probably 90 per cent, of the time, or more, he was a normal, healthy young man; that his seizures came without warning and with no regularity, and with such frequency that as a matter of fact he could not find a job, or could not hold it if he found one. In reference to such a situation, the court said :

“The government urges that Wood is physically and mentally able to hold a position a very large percentage of the time, and that there is no real reason why employers should not employ him. At the same time, it is all too clear that employers will not in fact employ him. It may be superstition, it may be prejudice, it may be illogical, but the truth still remains that other men won’t work with one who is apt to any time go off into an epileptic convulsion. So we are confronted with .this situation: An insured, physically and mentally able to hold a job, cannot, because of his epilepsy, find, or ever hope to find, employment. Is there liability? * * *
“I am of the belief that when, by reason of physical or mental disability, the insured is compelled to drop out of the ranks of the workers of the world, and stand by the side of the road and watch the world go by, there is liability under the policy. The insured may not be fastidious as to his employment; if, as a matter of fact, he is able to do any honorable work, he is not disabled. But neither is he chargeable with circumstances over which he has no control; and, if employers will not employ epileptics, the soldier is confronted with a condition and not a theory, and he is totally disabled.”

The appellant further contends that ultimate cure is reasonably certain, but this is problematic, to say the least. The probabilities'would seem to be tbe other way; but, in any event, the poliey itself provides for such .a contingency, because the insured may be called upon at any time to furnish proof satisfactory to' the Director of the United States Veterans’ Bureau of the continuance of his total permanent disability, and, if he fails to- furnish such proof, all payments of monthly installments on account of total permanent disability shall cease, -and all premiums thereafter falling due shall be payable in conformity with the policy.

The appellant also contends that the complaint -failed to allege, and the proof failed to show, the receipt of due proof of total permanent disability by the Veterans’ Bureau, from which it is argued that due proof Whs not made or furnished until the date of the trial, and that a judgment awarding benefits relating back to a date exceeding six months prior to the date of the verdict is erroneous. If it were a fact, as claimed by the government, that there was neither allegation nor proof of the receipt of due proof of total1 permanent disability, the defect would not1 Only "affect the amount of recovery, but the jurisdiction of the court would be entirely defeated, because the receipt of due proof of total permanent disability and a denial of the elaim for insurance benefits by the Veterans’ Bureau, or a disagreement in relation-thereto, is a prerequisite to the exercise of jurisdiction by the courts. Manke v. United States (C. C. A.) 38 F.(2d) 624; Bernsten v. United States (C. C. A.) 41 F.(2d) 663; United States v. Burleyson (C. C. A.) 44 F. (2d) 502. For the like reason, the denial of liability by the government can have no such effect as is claimed for it by the appellee.

As. already stated, the poliey expressly limits back payments to a date not exceeding six months from the receipt of due proof of total permanent disability, and we entertertain no doubt that this limitation is binding on both the Bureau and the courts. Were it not for a concession made by the government, it'is not at all clear to us that the courts can give judgment for installments antedating the receipt of the due proof specified in the poliey. The policy provides that payments may relate back to a date not exceeding six months prior to receipt of due proof; and the word “may” is usually permissive, not mandatory. This is especially true where, as here, it is followed in the same sentence by the word “shall.” And, if the allowance of back installments is discretionary with the Bureau, as it seems to be, it is questionable, at least, whether that discretion may be exercised by the court or jury. -But, in view of the concession made by the government, we will not pursue the inquiry further.

For reasons heretofore stated, we are of opinion that the complaint contained a sufficient allegation of the presentation and receipt of due proof of total and permanent disability on January 22, 1929, and that allegation was .admitted by the answer. Judgment was given for back installments to October 1, 1928, that is, for a period of less than six months prior to the receipt of the due proof. In other words, the six-month period runs from the date of the receipt of due proof, and not from the date of the verdict as claimed.

The judgment is therefore affirmed.


text:
    UNITED STATES v. WHITE.
    No. 6298.
    Circuit Court of Appeals, Ninth Circuit.
    March 30, 1931.
    Geo. J. Hatfield, U. S. Atty., and Hubert Wyckoff, Jr., and H. A. Van Der Zee, Asst. U. S. Attys., all of San Francisco, Cal.
    Alvin Gerlack, of San Francisco, Cal., for appellee.
    Before RUDKIN, WILBUR and SAWTELLE, Circuit Judges.
   RUDKIN, Circuit Judge.

The complaint in this case contained an allegation similar to the allegation found in the complaint in United States v. Ranes (C. C. A.) 48 F.(2d) 582, decided this day, alleging that on February 23, 1929, application was made to the Veterans’ Bureau for the payment of insurance benefits on account of total permanent disability. This allegation was denied by tbe answer, and no evidence was offered at the trial tending to prove the date upon which proof of total permanent disability was received or furnished, if at all. A letter from the Veterans’ Bureau, under date of June 19, 1929, disallowing the claim for insurance benefits, was received in evidence, in which it was stated that the letter was evidence that a disagreement existed under the provisions of the World War Veterans’ Act, but no reference was made to the date upon which the proof was received. The action was tried by the court without a jury. The court found that the plaintiff has been totally and permanently disabled since September 1, 1927, and gave judgment for all insurance benefits accruing since that date. It will thus be seen that the court awarded judgment for installments accruing for about eighteen months prior to the receipt of proof of disability. For the reasons stated in the Ranes Case, supra, this was error, for which the judgment must be reversed.

The judgment is therefore reversed and the case is remanded, with instructions to take further testimony as to the date of receipt "of due proof of total permanent disability, and to enter judgment in favor of the plaintiff for installments accruing not exceeding six months prior to that date.