author: LA BUY, District Judge.

text:
    NATIONAL NUT CO. OF CALIFORNIA v. SUSU NUT CO. SAME v. KELLING NUT CO. et al.
    Nos. 15637, 43C423.
    District Court, N. D. Illinois, E. D.
    Jan. 25, 1945.
    John J. McLaughlin, of Chicago, Ill., and Charles S. Evans and Hugh N. Orr, both of San Francisco, Cal., for plaintiff.
    Arthur D. Welton, Jr., Winston, Strawn & Shaw, James C. Leaton and West, Leaton & West, all of Chicago, Ill., for defendants.
   LA BUY, District Judge.

The plaintiff in the two causes above entitled has made the following motions:

(a) That the above two causes be consolidated; that all of the parties defendant in the two cases be made parties defendant in the consolidated action; that the Bill of Complaint filed in Civil Action 43 C 423 stand as an amended and supplemental complaint in Equity Case No. 15,637 without prejudice to the rights or obligations of any party with respect to any issue heretofore pleaded or joined or any ruling of the court heretofore made with respect thereto.

(b) For an answer directing the defendants and each of them within ten days to file an answer or otherwise plead to the amended and supplemental bill of complaint herein.

The motion to consolidate the causes.

Under Rule 42(a) of Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, causes may be consolidated where the causes sought to be consolidated involve a common question of law or fact. The court has examined the Amended and Supplemental Bill of Complaint filed in Equity No., 15,637 and the Bill of Complaint filed in Civil Action No. 43 C 423, and from such examination concludes that the cause of action set up in the Amended and Supplemental Complaint filed in Equity No. 15,637, and the first cause of action set up in Civil Action No. 43 C 423 have common questions of law and fact. They both refer to, a claimed infringement of United States Letters Patent No. 1,958,-405, and Reissue No. 20,024.

In the court’s opinion these questions, which are common to both suits can best be settled in a consolidated cause. It is true-that the issue of anti-trust law violation is. not set up in Equity Cause No. 15,637 nor is the issue of unfair competition raised inEquity Cause No. 15,637. The trial of these issues in cause No. 43 C 423 will not cause any prejudice to the defendant in Equity Cause No. 15,637 as it is also a defendant in Cause No. 43 C 423. A decision' of the validity or non-validity of the patents involved herein, and a decision of whether any of the defendants in Civil' Cause No. 43 C 423 have infringed said-patents if they are held valid, will determine those issues in both cases. It is not necessary to have two suits pending involving the same question, and the convenience of this court as well as that of the-litigants can be best subserved by a consolidation of these two causes.

The motion for a consolidation' will be.allowed.

The motion of plaintiff that all of the parties defendant in the two cases he made parties defendant in the consolidated action.

In the case of Johnson v. Manhattan Ry. Co., 289 U.S. 479, 496, 497, 53 S.Ct. 721, 727, 77 L.Ed. 1331, two equity causes were consolidated and in construing the effect of the consolidation, the court said: “Under the statute, 28 U.S.C. § 734, (28 U.S.C.A. § 734), consolidation is permitted as a matter of convenience and economy in administration, but does not merge the suits into a single cause, or change the rights of the parties, or make those who are parties' in one suit parties in another.”

In the case of Toledo, St. L. & K. C. R. Co. v. Continental Trust Co., 6 Cir., 95 F. 497, a creditors suit and a foreclosure suit were consolidated. In passing on the effect of the consolidation, the court said on page 506: “Such consolidation is primarily but an expedient adopted for saving costs and delay. Each record is that of an independent suit, except in so far as the evidence in one is, by order of the court, treated as evidence in both. The consolidation does not change the rules of equity pleading, nor the rights of the parties, as those rights must still turn on the pleadings, proofs, and proceedings in their respective suits. The parties in one suit do not thereby become parties in the other, and a decree in one is not a decree in the other, unless so directed. It operates as a mere carrying on together of two separate suits supposed to involve identical issues, and is intended to expedite the hearing and diminish the expense,”

In the case of Taylor v. Logan Trust Co., 8 Cir., 289 F. 51, the court said (page 53): “It is true that Taylor was a party to the suit brought on behalf of creditors, and that this creditors’ suit and the foreclosure suit had been consolidated; but such consolidation did not make the parties to one suit parties to the other.”

In the case of Nolte v. Hudson Nav. Co., 2 Cir., 11 F.2d 680, two mortgage foreclosure suits and a creditors bill were consolidated. In passing on the effect of the consolidation, the court said (page 682) : “The consolidation of the causes was merely procedural and affected no substantial interest.”

In the case of Ex Parte Green, 221 Ala. 415, 129 So. 69, in discussing the effect of a consolidation of equity causes, the court quotes with approval from 1 Corpus Juris 1121, 1 C.J.S. Actions, § 107, p. 1341, from which they quote on page 418 of 221 Ala., on page 71 of 129 So., as follows:

“The cases preserve their separate identity, and are to be determined exactly as if they were heard separately. The consolidation does not make the parties in one suit parties to the other, or change the issues in the respective cases, or alter the rights of the parties, which must still turn upon the pleadings, proof and proceedings in the respective cases. * * *
“ ‘A consolidation in equity does not change the rules of equity pleading, or make the pleadings in one suit a part of the pleadings in the other. Each case must still be determined upon its own pleadings, and the consolidation does not render admissions of the pleadings ineffectual as applied to the particular cases in which they were made.’ 1 Corpus Juris, 1137. * * *
“The consolidation therefore does not destroy the identity of the two suits.”

In the case of First Nat. Bank v. McGraw, 85 W.Va. 298, 101 S.E. 474, 478, two creditors’ bills were consolidated, and the effect of such consolidation was discussed by the court: “It was made a party in its own right, as a judgment creditor, but not as trustee, unless consolidation with these three suits, of another instituted by Margaret C. Hamrick against John T. Mc-Graw, for enforcement of a vendor’s lien, in which it was a party as trustee, may be deemed to have made it a party, as such, to these causes. It is urged that it did not because the Hamrick suit was afterwards partially or wholly severed from the others. Since the consolidation did not have the effect claimed, the character of the severance is immaterial. Consolidation does not change the rules of equity pleading, nor the rights of the parties, which must still turn on the pleadings, proofs, and proceedings in their respective suits. The parties in one suit do not become parties in the other, by consolidation, and a decree in one is not a decree in the other unless so directed.”

In the case of Bouldin v. Taylor, 152 Tenn. 97, 275 S.W. 340, 349, the court said:

“Suppose the chancellor does make an order ‘consolidating’ the several equity suits, — What does he accomplish?
“Does this make the pleadings and depositions in Suit No. 1 a part of suit No. 2?
“It is perfectly well settled in this state that the order has no such effect. The rights of the litigants ‘must still turn on the pleadings, proof, and proceedings of their respective suits.’ Knight v. Ogden, supra [3 Tenn. Ch. 409]; Ogburn v. Dunlap, 1882, 9 Lea, 162, 165, 166; Hatcher v. Royster, 1884, 14 Lea, 222, 228; Brevard v. Summar, 1870, 2 Heisk. 97, 105, 106; Lofland v. Coward, 1873, 12 Heisk. 546, 547, 548; Mowry v. Davenport, 1880, 6 Lea, 80, 91; Masson v. Anderson, 1873, 3 Baxt. 290, 298, 299.
“The rule announced in these cases seems to be generally accepted. 4 Ency. Pleading & Pr. 691; 8 Cyc. 608; Fletcher, Eq. Pl. § 455; 1 Ruling Case Law, 361; 1 Corpus Juris, p. 1137 [1 C.J.S. Actions, § 113, p. 1377]; Holmes & Co. v. U. S. Fire Ins. Co., C.C., 1906, 142 F. 863, 866; Toledo, etc., R. Co. v. Continental Trust Co., 6 Cir., 1899, 95 F. 497, 506, 36 C.C.A. 155; and see Handley v. Sprinkle, 1904, 31 Mont. 57, 77 P. 296, 3 Ann.Cas. 531, 532, and reporter’s note at page 535.”

In the case of East Lake Lumber Box Co. v. Simpson, 5 Tenn.App. 51, two separate suits were filed by mechanics’ lien claimants. The statute provided that the contractor and owner should be made parties to the suit to enforce mechanics’ lien suit. One of the suits made the owner and contractor a party and the lumber company did not make the contractors parties. These suits were consolidated and in passing on the effect of the consolidation the court said on page 56: “It may be insisted that these causes were consolidated and all parties, including the contractors, were before the court, and that a consent decree was rendered in favor of the Lumber Company against the contractors, from which they did not appeal, and thereby the fur-nishers’ debt was established; but upon an examination of the record, it will be seen that the situation cannot help the Lumber-Company. The contractors were not made defendants to the Lumber Company’s bill. There is no order of record consolidating the cases, hence, at most, they were merely tried together for convenience. The decree should show the consolidation and the hearing of the causes together (Ogburn v. Dunlap, 9 Lea, 162) ; but had the causes been properly consolidated, that would not help the Lumber Company, as consolidation does not change the rules of pleading, nor the rights of the parties. These rights still depend upon the pleadings, proof aqd proceedings in the respective causes, the same as if no consolidation had been had.”

In the case of Herren v. Beck, 231 Ala. 328, 164 So. 904, 905, the court said: “The order of consolidation in equity did not have the effect of causing the two suits to become one, and thereby to destroy their identity as at law.”

In the case of Willcox v. Goess, D.C., 16 F.Supp. 350, 384, the court said: “An order of consolidation in equity does not merge or fuse the causes thereby consolidated, but is merely an expedient which promotes convenience and economy in judicial administration because it enables a single trial of several causes involving the same issues or overlapping issues to be had.”

Under the above authorities an order of consolidation does not have the effect of making the parties to one suit parties in another suit, and the court has no power to so order. The causes although consolidated preserve their separate identity and the pleadings in one case cannot be-made the pleadings in the other. The rights of the parties will be determined upon the pleadings, proofs and proceedings in-each case. The consolidation is made for the purpose of allowing the proofs in one-cause to stand as the proofs in the other with reference to the questions of fact which are commonly involved, and for the further purpose that any common question of law in the two cases may be decisive in one decision of the court. By this motion plaintiffs are in effect seeking a merger of the two causes and not a consolidation.

The motion that the parties defendant in the two cases be made parties defendant in. the consolidated action is denied.

The motion of plaintiff that the Bill of Complaint filed in Civil Action 43 C 4®3 stand as an Amended and Supplemental Complaint in Equity in Equity-Case No. 15,637, without prejudice to• the rights or obligations of any party-with respect to any issue heretofore-pleaded or joined or any ruling of the-court heretofore made with respect-thereto.

If this motion were granted, it would in-effect work a merger of the two causes as-there would only be one Amended and Supplemental Complaint pending before-the court. Such an order would not be an order of consolidation in its true sense, as-Case No. 15,637 would in effect be superseded and there would be only one pleading; to be considered by the court. Such action would prejudice the rights of- the defendants with respect to 'action taken in the two suits, and the question of costs would be seriously complicated by such action. Also, the Bill of Complaint filed in Civil Action No. 43 C 423 could not stand as a pleading in cause No. 15,637 because the only defendant in that cause is the Susu Nut Company and the defendants in cause No. 43 C 423 cannot be made defendants in the other cause as above passed on by this •court.

(b) The motion of plaintiff for a rule on the defendants to answer the Amended and Supplemental Complaint which plaintiff has moved the court for leave to file in cause No. 15,637.

Since the court is denying leave to plaintiff to file the complaint in cause No. 43 C 423 as an Amended and Supplemental Complaint in cause No. 15,637, it follows that no rule as requested by the plaintiff can be entered. The motion for the entry of such a rule will, therefore, be denied.

An order may be prepared that the two causes be tried together; that the evidence taken in one cause shall be considered as taken in both causes; that one decree be entered herein; that the question of costs in both causes will be reserved for future consideration by the court; and that the other motions be denied as above indicated.


source: Caselaw Access Project

author: SMITH, District Judge.

license: Public Domain

text:
    UNITED STATES, to Use of BROWN et al. v. MILLER-DAVIS CO. et al.
    Civ. A. No. 1208.
    District Court, D. Connecticut.
    April 20, 1945.
    Sidney Vogel and Vogel & Sigsway, all of South Norwalk, Conn., for plaintiff.

      James W. Carpenter and Day, Berry & Howard, all of Hartford, Conn., for defendants.
   SMITH, District Judge.

This is an action under the Miller Act, 40 U.S.C.A. §§ 270a-270d, against á general contractor and sureties on his bond, brought for the use of a subcontractor for electrical work and materials and for damages for delay.

Originally, in addition to the claim for delay, ten items were in dispute. . Six of these items, totaling $403.58 are now admitted by the defendants, leaving in dispute only the following items, (b) and (c), $45.33 and $100.74 for the placing of additional stringers and rafters (also the subject of the counterclaim), (h), $238.74 representing one-half the charge for rewiring six B.O.Q’s at the request of the defendant Miller-Davis Company, and $633.08 representing deductions for work and labor eliminated by alterations in the original contract.

It is admitted that payment has been withheld in the amount of all these items.

In the course of construction of a building known .as the MRS building, where the original plans called for suspending light fixtures from the roof, government inspectors requested that they be hung from a lower level, by the installation of additional stringers and rafters. Defendant Miller-Davis Company which was required to furnish all carpentry work under its original contract, was requested by the plaintiffs to install the stringers and rafters and did so at a cost of $45.33 and $100.74 for labor, the government furnishing the lumber. The testimony established that the change was for the benefit of and at the request of the government and it must have been so understood by Miller-Davis. Perhaps the requisite formalities were not carried through to establish the claim against the government, but there appears no basis for charging it back against the plaintiffs.

The plaintiffs produced testimony that six B.O.Q’s were rewired at the request of defendant Miller-Davis Company at an additional cost of $477.48. The defendants do not dispute the request to rewire some of the B.O.Q’s, and do not seriously dispute the reasonableness of the amount, $477.48 if six were rewired. The only positive testimony is that produced by the plaintiffs placing the number at six, which testimony seems entirely worthy of credit.

On a building designated as S.P. 14, the plans were altered' by the United States after execution of the subcontract, eliminating electrical work and material in the amount of $633.08. The plaintiffs were bound by the contract to accept such changes and deductions therefor. They admit the claim is “tenuous”. The deduction was properly made under the terms of the contract.

The largest item in the claim of the plaintiffs is that for damages for delay, as to which they have submitted evidence of the cost of maintaining supervisory personnel and equipment on the job from July 12, 1942, the completion date of the original subcontract to August 26, 1942, which together with insurance, overhead, and profit items amount in all to $3,923.60.

The completion date for the plaintiffs with penalties attached, may well be held to carry with it a contractual duty on the defendants to have the work in condition for the plaintiffs, to start the electrical work a reasonable time before the completion date. Great Lakes Constr. Co. v. Republic Creosoting Co., 8 Cir., 1943, 139 F.2d 456.

Plaintiffs fail here to establish the claim for damages for delay on two grounds, however. The principal contract provided for extensions of completion dates by the United States on certain conditions, and such extensions were later obtained by defendant Miller-Davis Company on all delays which involved electrical work. Moreover, the only period for which proof of damage is attempted, July 12-August 26, 1942, is a period during which plaintiffs used some or all of this supervisory personnel and equipment on supplemental and additional subcontracts on the same project, having completion dates as late as August 27, 1942 in one instance. No damages for delay caused by defendant Miller-Davis Company are established.

Plaintiffs are entitled to recover the following amounts: the items totalling $403.-58 which are admitted, item (b) $45.33 and (c) $100.74 for the charge back for stringers and rafters, and item (h) $238.74 for the charge back of 50% of the claim for rewiring the six B.O.Q’s, a total of $788.39.

Finding of Facts

1. This is an action brought under the Miller Act. Act of August 24, 1935, Ch. 642, 49 Stat. 793, 794, 40 U.S.C.A. §§ 270a-270d.

2. On March 31, 1942, the United States and the defendant Miller-Davis Company-entered into a written contract for the construction by the Miller-Davis Company of certain buildings and structures at Windsor Locks, Connecticut.

3. The defendant Miller-Davis Company, as principal, and the defendants Seaboard Surety Company and Yorkshire Indemnity Company, as sureties, entered into a payment bond in the sum of $494,429.61 conditioned on the payment by Miller-Davis Company of all persons supplying labor and material on the work covered by the construction contract.

4. Final settlement between the United States and Miller-Davis Company under the contract was made on November 25, 1943.

5. In April, 1942, the plaintiffs entered into a subcontract with the defendant Miller-Davis Company to furnish all labor and material required to do the electrical work in accordance with the contract referred to in paragraph 2 above, for the sum of $34,-500.

6. The original principal contract required completion of construction by Miller-Davis Company by July 12, 1942.

7. The contract also provided that changes might be made in the plans and specifications by the United States while the work was in progress, and for additional payments and deductions for added and for decreased costs because of such changes.

8. The contract also provided that extensions of the completion date might be granted by the United States for cause.

9. The subcontract required plaintiffs to so perform their work as to cause no delay to Miller-Davis Company or other subcontractors on the job.

10. A supplemental subcontract was entered into between plaintiffs and Miller-Davis Company whereby plaintiffs were to furnish labor and material for electrical work for the construction of an additional building known as MRS 1 for the sum qf $4,250.

11. On May 22, 1942, a separate subcontract was entered into between plaintiffs and Miller-Davis Company whereby plaintiffs were to furnish labor and material for electrical work for the construction of a building known as an AF warehouse for the sum of $4,000.

12. On July 7, 1942 a separate subcontract was entered into between plaintiffs and Miller-Davis Company whereby plaintiffs were to furnish labor and material for electrical work for the construction of a Post Office building, for the sum of $275.

13. Plaintiffs satisfactorily completed all work and furnished all materials required by each of the subcontracts and by any changes therein.

14. Plaintiffs have been paid by Miller-Davis Company all sums claimed to be due under all the subcontracts except (1) an amount claimed to be due as damages for delay caused plaintiff by Miller-Davis Company, (2) the sum of $403.58 consisting of items formerly in dispute, but admitted on trial to be due the plaintiffs, (3) sums of $45.33 and $100.74 charged back against the plaintiffs by Miller-Davis Company for labor costs incurred by Miller-Davis Company for placing additional stringers and rafters in the MRS building, (4) $238.74 withheld by Miller-Davis Company as a claimed excess over a reasonable charge for extra work in rewiring buildings known as B.O.Q’s, and (5) $633.08 deducted from the contract price for decreased costs to the plaintiffs through changes ordered by the United States in the plans and specifications on a building known as S.P. 14.

15. Changes were made by the United States in the plans and specifications of the building S.P. 14 which decreased the cost to the plaintiffs of labor and material in the net amount of $633.08.

16. A change in the method of construction of a building known as the MRS building, changing the points for hanging the lights from the roof to additional rafters and stringers at a lower level, was adopted at the request of representatives of the United States.

17. Lumber for the change was furnished by the United States, carpenter work by Miller-Davis Company, at a cost for carpenter work to Miller-Davis Company of $45.33 and $100.74.

18. Additional work in rewiring six buildings known as B.O.Q’s, which was not called for by any of the written subcontracts, was done by the plaintiffs at the request of the defendant Miller-Davis Company.

19. The fair and reasonable value of the additional work done by the plaintiffs on that request in the rewiring of the six B.O.Q’s is $477.48.

20. Extensions of time for completion on the original contract were granted by the United States on a number of the buildings including an extension to August 17, 1942 of the motor repair shop known as S.P. 14.

21. These extensions were granted at some time subsequent to the original completion date.

22. Plaintiffs had no' knowledge of the granting of the extensions -prior to the completion of their work under all the subcontracts.

23. Plaintiffs were delayed in beginning work under the original subcontract on some buildings by the failure of the defendant Miller-Davis Company to complete carpentry work on schedule.

24. Plaintiffs were engaged subsequent to July 12, 1942 in work under the supplemental and separate subcontracts referred to in paragraphs 10, 11 and 12 above, with scheduled completion dates August 22, 1942, August 27, 1942, and July 17, 1942.

25. Plaintiffs maintained supervisory personnel and equipment at the job for the completion of these subcontracts as well as for the original subcontract.

26. Plaintiffs have failed "to prove by a fair preponderance of the evidence any damage caused them by delay through the failure of the defendant Miller-Davis Company to complete preliminary carpentry or other work on schedule.

27. No claim was made by plaintiffs for damages for delay prior to January, 1944.

Conclusions of Law

1. The court has jurisdiction over the parties and the subject matter of this action.

2. The action is timely brought under the Act of August 24, 1935.

3. The defendant Miller-Davis Company was required to furnish all carpentry work on contract changes caused by the United States.

4. The defendant Miller-Davis Company is entitled to deduct from amounts otherwise due the plaintiffs the savings to the plaintiffs by reason of electrical work and labor eliminated by change orders of the United States.

5. Plaintiffs are entitled to recover the fair and reasonable value of additional work done by them at the request of the defendant Miller-Davis Company.

6. Plaintiffs are entitled to recover nothing on their claim for damages for delay.

7. Defendant Miller-Davis Company is entitled to recover nothing on its counterclaim.

8. The plaintiffs are entitled to recover of the defendants damages in the total sum of $788.39 and their costs.

Let the clerk enter judgment accordingly forthwith.


author: ST. SURE, District Judge.

text:
    Ex parte GREGOIRE.
    No. 24652-S.
    District Court, N. D. California, S. D.
    June 12, 1945.
    Fred McDonald, of San Francisco, Cal., for petitioner.

      Frank J. Hennessy, U. S. Atty., of San Francisco, Cal., for I. F. Wixon, District Director of Immigration and Naturalization, Department of Justice, respondent.
   ST. SURE, District Judge.

Petitioner, detained as an enemy alien by the District Director of Immigration and Naturalization for the port of San Francisco, seeks release by writ of habeas corpus on the ground that he is a French citizen and therefore wrongfully deprived of his liberty.

Petitioner was taken into custody under a warrant of arrest issued by the Attorney General of the United States, by order of the President, on January 2, 1942. Title 50 U. S. C. A. § 21; Presidential Proclamation No. 2526, 55 Stat. 1705, issued December 8, 1941. The Government moves that the petition be denied and the order to show cause heretofore issued be discharged. The facts are undisputed and counsel for respective parties have stipulated that the matter may be submitted upon the record and papers in the case, as though a hearing had been had upon the merits.

Petitioner was born in Metz, Province of Lorraine, Germany, on October 9, 1894. His father was born in the Province of Lorraine in 1865, prior to its cession to Germany. The Treaty of Peace of 1919 provided that a native of Lorraine, descended from those who were French citizens prior to the annexation of the Province by Germany, became, with certain exceptions not applicable here, ipso facto nationals of France. Prior to his entry into the United States in 1941, petitioner practiced law in France for some twenty-two years. His French citizenship is admitted.

The question for decision turns on the interpretation of section 21 of 50 U.S.C.A., which provides that: “Whenever there is a declared war between the United States and any foreign nation or government * * * all natives, citizens, denizens, or subjects of the hostile nation or government, being of the age of fourteen years and upward, who shall be within the United States and not actually naturalized, shall be liable to be apprehended, restrained, secured, and removed as alien enemies.” (Italics supplied.)

In United States ex rel. D’Esquiva v. Uhl, 2 Cir., 137 F.2d 903, 905, the court held that an Austrian who left Austria and established French residence twenty years before the invasion of Austria by Germany, did not become a German citizen, but remained a native of Austria. Petitioner relies upon the following dicta in this case: “And an Alsatian should not be held subject to detention as an alien enemy merely because (unlike other members of his family, for example) he happened to have been born after the original cession of Alsace to Germany and prior to its return to France in 1919.” The use of the word “merely” is significant, in that it indicates that in the presence of further circumstances, such person might be deemed an enemy alien. In United States ex rel. Schwarzkopf v. Uhl, 2 Cir., 137 F.2d 898, 902, decided by the same court and referred to in the D’Esquiva case, the court said: “The obvious purpose of [the Alien Enemy Act] was to include within its ambit all aliens who by reason of ties of nativity or allegiance might be likely to favor 'the hostile nation or government’ and might therefore commit acts dangerous to our public safety if allowed to remain at large.”

Although not determinative of the question here, it is interesting to note that the return to the order to show cause by the District Director states that petitioner attended the University of Heidelberg, was-conscripted and fought in the German army in the first World War, attended a meeting' in Germany in 1935 which was addressed by Adolph Hitler; that while practicing law in Paris he represented various German interests, and during the recent occupation of France by Germany, entertained high German officers in his law office in Paris.

The language of the statute describing persons subject to restraint and removal is in the disjunctive. A man may be a native of one country and a citizen of another, and if he be a native of a'hostile country his citizenship in a friendly country does not change or efface the fact of his nativity. The word “native” pertains to-birth. “Hence a person remains a native of the country of his birth,' although he has moved away and become a citizen or subject of another nation or government.”' United States ex rel. D’Esquiva v. Uhl, supra. Petitioner was born in Germany, and whatever citizenship he later acquired, he is a native German within the purport of the statute.

The petition for a writ will be denied and the order to show cause discharged.


author: MOSCOWITZ, District Judge.

text:
    In re ROCILLO.
    No. M-979.
    District Court, E. D. New York.
    May 16, 1945.
    Sam S. Seitz, and David Sable, both of New York City, for respondent.
    Paul L. Ross, Regional Enforcement Executive Region II, Callman Gottesman, Chief Enforcement Atty., and John D. Masterton, Regional Litigation Atty., all of New York City, for Office of Price Administration.
   MOSCOWITZ, District Judge.

Respondent has made a motion by order to show cause for an order of this court staying the operation and enforcement of a Suspension Order entered by the Chief Hearing Commissioner of the Office of Price Administration of Region II pending the determination of an appeal from said order by the Hearing Administrator in Washington. The Court has been advised by letter dated May 10, 1945 from the Regional Litigation Attorney of the Office of Price Administration that the Hearing Administrator affirmed the issuance of the Suspension Order on April 9, 1945. The application is therefore rendered moot but it was improperly brought on in the first place. The jurisdiction of this Court to grant the relief sought rests exclusively on Section 205(g) of the Emergency Price Control Act, as amended by the Stabilization Extension Act of 1944, 50 U.S.C.A. Appendix § 925(g). That section provides for an action to enjoin the operation of orders for suspension of allocations but makes no provision for a motion in the District Court for such relief.

The Court would in any event not be disposed to grant the application on the merits. Respondent was a gasoline station operator. Through the Verification Center of the Office of Price Administration it was ascertained that gummed sheets transferred by respondent to his suppliers of gasoline, to which are affixed the coupons received from purchasers (commonly identified as “bingo sheets”) contained 158 counterfeit A-ll coupons with a gallonage value of 474. A hearing was held at respondent’s request before the Hearing Commissioner, which conformed in every respect to the requirements of Procedural Regulation No. 4.

Under Section 2(a) (2) of Act June 28, 1940 amended by 50 U.S.C.A.Appendix § 1152(a) (2), Title III of the Second War Powers Act, 56 Stat. 178, 50 U.S.C.A. Appendix, Section 633, “Whenever the President is satisfied that the fulfillment of requirements for the defense of the United States will result in a shortage in the supply of any material or of any facilities for defense or for private account or for export, the President may allocate such material or facilities in such manner, upon such conditions and to such extent as he shall deem necessary or appropriate in the public interest and to promote the national defense.” The allocation of gasoline was duly delegated to the Office of Price Administration and Ration Order 5C (7 Fed. Reg. 9135), was duly promulgated pursuant to such authority. Section 1394.8302 of Ration Order 5C provides that any person who violates the ration order may “by administrative suspension order” be prohibited from receiving, selling, using or disposing of gasoline for such period as is deemed “necessary or appropriate in the public interest and to promote the national security”. Procedural Regulation No. 4 was adopted February 6, 1943 by the Office of Price Administration (8 Fed.Reg. 1744, revised 9 Fed.Reg. 2558) to govern the proceedings for the issuance of suspension orders.

Respondent advances the contention that the hearing before the Commissioner is a quasi-criminal proceeding and that constitutional guarantees to which an accused in a criminal proceeding is entitled were not observed. On the contrary, it is well settled that administrative suspension proceedings are not penal in nature. Suspension orders are not designed to punish violators of ration orders but to protect the distribution system devised to conserve scarce commodities. The proceeding before the Hearing Commissioner is merely an inquiry to determine whether the person being investigated is fit to be entrusted with a part in the allocation and distribution of rationed materials. The suspension order is an administrative order intended to promote the national security, rather than a penalty. Stewart & Bro. Inc. v. Bowles, 1944, 322 U.S. 398, 64 S.Ct. 1097, 88 L.Ed. 1350; Brown v. Wilemon, 5 Cir., 1944, 139 F.2d 730; Gallagher’s Steak House, Inc. v. Bowles, 2 Cir., 1944, 142 F.2d 530; Bowles v. Jacobson, 5 Cir., 1944, 145 F.2d 975. Therefore, there was no invasion of respondent’s rights.

The Commissioner’s findings against respondent and that respondent violated Ration Order 5C are administrative determinations of fact which this Court should not disturb. There is ample evidence in the record to sustain the finding and the decision was not arbitrary or capricious.

The application is denied. Settle order on notice.

       The principal contention made upon the argument of this application was that respondent had not been informed by the Hearing Commissioner of his right to counsel. This is dearly negatived by the record (p. 2). The Commissioner asked respondent if he had an attorney and, upon being told that he did not, asked: “You understand the charges in the ease and are prepared to proceed without an attorney?” to which respondent answered, “Yes, sir”.


author: VAUGHT, District Judge.

text:
    In re OKLAHOMA RY. CO.
    No. 7534.
    District Court, W. D. Oklahoma.
    June 12, 1945.
    D. I. Johnston and Roy C. Lytle, both of Oklahoma City, Okl. (of Keaton, Wells & Johnston, of Oklahoma City, Okl.), and W. J. Wallace, of St. Louis, Mo., for Mississippi Valley Trust Co.
    Kent Shartel, of Oklahoma City, Okl. (of Richardson, Shartel, Cochran & Pruet, of Oklahoma City, Okl.,), and Streeter B. Flynn, of Oklahoma City, Okl. (of Rainey, Flynn, Green & Anderson, of Oklahoma City, Okl.), for debtor.
   VAUGHT, District Judge.

This is an application of the Mississippi Valley Trust Company of St. Louis, Missouri, as Indenture Trustee under the first mortgage bond issue, to have the court construe its order of December 9, 1944, to vacate the same as being incorrect, and to make an order directing the Debtor’s Trustee to pay interest on the claim of the applicant upon what is claimed as delinquent unpaid interest coupons.

The record discloses the following facts: The Oklahoma Railway Company, the debt- or in these proceedings (hereinafter referred to as the Debtor), on January 3, 1911, executed a Trust Indenture in favor of the applicant as Trustee securing an issue of $12,000,000 of first refunding mortgage five per cent, gold bonds, and under said authorization, $5,280,000 were issued, and on September 27, 1939, there were outstanding and unpaid bonds of a par value of $2,447,000. The Trust Indenture, so far as pertinent here, is as follows:

“Resolution of
“Board of
“Directors.
“Whereas, the board of directors of the Railway Company, at a meeting of said board duly convened and held on the 10th day of April, A. D. 1911, did vote and determine to exercise the power conferred upon said corporation to borrow money as aforesaid and did vote and order that the bonds of the Railway Company should be issued in the aggregate sum of twelve million dollars ($12,000,000), to be evidenced by twelve thousand bonds of the Railway Company, in the denomination of one thousand dollars ($1,000) each, dated as of the third day of January, A. D. 1911, and due and payable January 1, 1941, with interest from January 1, 1911, until paid at the rate of five per centum (5%) per annum, payable semi-annually, the interest until maturity of the bonds, to be evidenced by coupons attached thereto, both principal and interest being payable in gold coin, as will more fully appear in the form of bond and coupon herein set out at large, * * *. ******
“(Form of Bond.)
“United States of America
“State of Oklahoma
“Oklahoma Railway Company
. “First and Refunding Mortgage Five Per Cent. Gold Bond.
«No.- $1,000.
“Oklahoma Railway Company, a corporation created and existing under the laws of Oklahoma, for value received, promises to pay to the bearer hereof, or, if this bond be registered, to the registered holder hereof, at Mississippi Valley Trust Company, St. Louis, Missouri, or, at the option of the holder, at Harris Trust and Savings Bank, Chicago, Illinois, One Thousand Dollars in gold coin of the United States of America, of or equal to the present standard of weight and fineness, on the first day of January, 1941, and to pay interest thereon from the first day of January, 1911, until paid, at the rate of five per cent, per annum, payable semi-annually, on the first days of July and January in each year in like gold coin, at said Mississippi Valley Trust Company or, at the option of the holder of coupons, at said Harris Trust and Savings Bank, such interest until the maturity hereof being payable only upon presentation and surrender of the respective interest coupons hereto annexed evidencing such interest.
******
“If default shall be made in the payment of the interest on this bond or in the performance of any of the covenants and agreements in said deed of trust, contained, on the part of the Railway Company to be performed, then the principal hereof may be declared and become due and payable as provided therein.
******
“(Form of Coupon.)
“$25. No.-
“Oklahoma Railway Company will pay to bearer, upon surrender hereof, at Mississippi Valley Trust Company, St. Louis, Missouri, or at the option of the holder at Harris Trust and Savings Bank, Chicago, Illinois, upon the first day of-, A.D. 19 — , Twenty-five Dollars ($25), in gold coin of the United States of America, being interest then due on First and Refunding Mortgage Five Per Cent. Gold Bond of said Railway Company No.-, all as provided in and subject to the terms of said bond and the deed of trust therein mentioned.
t<
“Treasurer.
******
“Article Eight.
“Covenant to pay principal and interest.
“Section 1. The Railway Company covenants that it will pay the principal of all the bonds issued under this indenture, and interest thereon until paid, such interest until the maturity of said bonds being payable only upon presentation and surrender of the interest coupons thereto belonging, when the same shall become due according to the terms thereof, such payments to be made in gold coin of the United States, of the present standard of weight and fineness, and without deduction from the principal or interest for any tax or taxes, charge or charges which the Railway Company may be required to pay or to retain therefrom under any present or future law of the United States, or of the State of Oklahoma, or any county or municipality therein. When and as the coupons attached to the said bonds shall be paid by or for the Railway Company, such coupons shall be canceled.
“Covenant not to extend coupons.
“Section 2. In order to prevent any accumulation of coupons after their maturity, the Company covenants and agrees that it will not directly extend or assent to the extension of the time for payment of any coupons of any of the bonds secured hereby by purchase or funding of such coupons or by any other arrangement. In case the time for payment of any such coupon shall be so extended, such coupon shall not be entitled in case of any default hereunder to the benefit or security of this indenture, except subject to the prior payment in full of the principal of all bonds issued and outstanding hereunder and of so much of the accrued interest thereon as shall not be represented by such extended coupons.
******
“Article Nine.
“Upon default Trustee may proceed to enforce rights.
“Section 2. In case (1) default shall be made in the due and punctual payment of any interest on any bond hereby secured and any such default shall continue for a period of sixty days; or (2) default shall be made in the due and punctual payment of the principal of. an;r bond hereby secured; or (3) default shall be made in the due observance or performance of any other covenant, condition or agreement herein required to be kept or performed by the Railway Company and any such last mentioned default shall continue for a period of sixty days after written notice thereof to the Railway Company from the Trustee, then in any and every case the Trustee may, and upon request of the holders of a majority of said bonds then outstanding shall, (1) cause this indenture to be foreclosed in any court of competent jurisdiction and the mortgaged property or any part or parts thereof to be sold; * * *
* * * * * #
“Section 4. The proceeds arising from any such sale or sales shall as received be applied as follows:
******
“Second. To the pro rata payment of all coupons matured and remaining unpaid, with interest thereon at the rate of five per cent. (5%) per annum (subject to the provisions of Section 2, Article Eight hereof), and, after'payment of such interest which shall have become due, the residue of such proceeds shall be applied in and towards the payment of the principal of such bonds as at that time may be outstanding hereunder, ratably and without discrimination or preference, until the same shall be fully paid; * *

On September 5, 1939, Mississippi Valley Trust Company, as Indenture Trustee, notified the Debtor of default in certain of the covenants contained in the Trust Indenture and demanded that such defaults be remedied within sixty days. The Debtor advised the Indenture Trustee soon thereafter that it admitted the defaults, that they had continued for a period of one year, that it could not remedy such defaults within sixty days or any other date, and that the Indenture Trustee might invoke any remedies or rights granted to it in the Trust Indenture for the protection of the bondholders. On September 25, 1939, the Indenture Trustee, pursuant to the terms of the Trust Indenture, declared all of the issued and outstanding bonds in the face amount of $2,447,000 to be due and payable and demanded immediate payment of the full amount represented by the outstanding bonds.

On September 27, 1939, the Debtor filed its petition in this cause under Chapter 10 of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq. At the time the petition was filed, there were no unpaid interest coupons due on the outstanding bonds, the last matured semi-annual interest coupons having been paid on July 1, 1939.

On February 10, 1940, the applicant filed its claim as a secured claim herein, said claim thereafter was allowed in the sum of $2,447,000, with interest at five per cent, until paid, and said claim as allowed was secured by a first mortgage on Debtor’s property. The bonds have been paid in full with five per cent, interest computed from July 1, 1939, to the date of payment. This application is for the purpose of having the court determine the amount of unpaid interest due, if any, after payment of the full amount of the principal together with interest at five per cent, thereon from July 1, 1939. The applicant concedes that all the principal has been paid and interest thereon at five per cent, from July 1, 1939.

This is one of those rare cases where the Debtor, during the administration in bankruptcy, has become solvent and able to pay its debts in full.

The applicant sets up four propositions in its brief:

First. Does the interest on the principal by virtue of the accelerated maturity of the bonds carry, after such maturity, interest at the contract rate or at the legal rate?

Second. Do the matured and unpaid semi-annual interest obligations bear interest from the date that the interest obligation should have been paid to date?

Third. What is the effect upon the foregoing propositions of the maturity date, or accelerated maturity date of the bonds?

Fourth. What is the effect, if any, of the intervention of the proceedings in bankruptcy ?

The fourth proposition will be considered first. The rule is well stated in 8 C.J.S., § 422, under Bankruptcy, which, so far as it is pertinent here, is as follows;

“As a general rule, the proof and allowance of a provable claim may include interest which has accrued thereon and would be recoverable at the time of the filing of the petition in bankruptcy; but interest accruing thereafter cannot be proved or allowed; and if the debt does not appear to have been due prior to the filing of the petition the allowance of the claim should not carry interest.
“The foregoing restriction on the right to receive interest accruing subsequent to the filing of the petition is applicable only in cases where the estate is insolvent, and if it is solvent interest is properly allowed and paid up to the time of the payment of the claim * * *.
“If it is legal, the rate of interest allowable is usually that which the bankrupt has agreed to pay; * * *. In the absence of a contractual specification of the rate, the interest allowable is the ordinary legal rate; * * *.
“On secured claims. Where a valid and unavoidable lien of a secured creditor secures the payment of both principal and interest, and the security or its proceeds are sufficient for that purpose, the creditor is entitled to obtain or take from the security or its proceeds, as against the trustee in bankruptcy, not only the interest accruing before the filing of the petition in bankruptcy but all interest up to the date the debt is paid. * * *”

Thus, it appears to be the general rule that where the bankrupt estate is solvent, a secured creditor is entitled to interest on his claim up to the date it is paid in compliance with the terms of the contract. The contract (the bond) in the present situation provides as follows:

“* * * with interest from January 1, 1911, until paid at the rate of five per centum (5%) per annum, payable semiannually, the interest until the maturity of the bonds, to be evidenced by coupons attached thereto, * *

The coupons themselves do not provide for the payment of interest upon default, but under Article Nine, section 4, supra, it is provided that in the event of foreclosure and sale of the property, the proceeds arising therefrom shall be applied as follows:

“Second. To the pro rata payment of all coupons matured and remaining unpaid, with interest thereon at the rate of five per cent. (5%) per annum * *

The bonds provide that only in case of foreclosure, interest is to be paid on “coupons matured and remaining unpaid.” There is no foreclosure here. Under the terms and provisions of the instrument the interest on the bonds is at the rate of five per cent, per annum “until paid.” Those are the plain terms of the bond.

The first three propositions, which are so closely related, will be considered together.

On September 25, 1939, the action of the applicant, in declaring the entire amount of bonded indebtedness immediately due and payable, accelerated the maturity of the bonds. There were no delinquent unpaid interest coupons on that date.

The bonded indebtedness together with interest thereon then due constituted the basis for the claim and were merged into the claim, which was allowed at the face of the bonds nlus five per cent, interest from July 1, 1939, until paid.

In the case of Garland et al. v. Union Trust Company et al., 63 Okl. 243, 165 P. 197, 202, 203, the Supreme Court of Oklahoma had under consideration this principle of law and, in very clear language, I think correctly stated the law as follows:

“* * * By this we do not mean to intimate that plaintiff, had it sued therefor, which it did not, was entitled to recover in this action on the interest coupons not due at the time the trustee accelerated the maturity of the principal debt and foreclosed therefor. On the contrary, on this point, we mean to say that recovery upon those coupons could not be had for the reason that the moment the principal debt and interest, accrued up to the time to which the maturity of the debt was accelerated, are paid, the remaining undue interest coupons are discharged. This is in keeping with authority (Dugan et al. v. Lewis et al., 79 Tex. 246, 14 S.W. 1024, 12 L.R.A. 93, 23 Am.St.Rep. 332; Georgia S. & F. R. Co. v. Mercantile [Trust & Deposit] Co., 94 Ga. 306, 21 S.E. 701, 32 L.R.A. 208, 47 Am.St.Rep. 153; Goodale v. Wallace, supra [19 S.D. 405, 103 N.W. 651, 117 Am.St.Rep. 962, 9 Ann.Cas. 545] ; Moore et al. v. Cameron et al., 93 N.C. 51), and is plaintiff’s theory of the case. It is also carried into the judgment of the court who permitted a recovery for the principal debt only, together with interest thereon at 6 per cent, from December 1, 1912, or the time when the first two notes fell due, up to the date of the judgment.
******
“We said just now that plaintiff was not entitled to recover for the remaining interest coupons not due at the time the trustee declared the principal debt due and foreclosed therefor. This, we said, was for the reason that the moment the principal and accrued interest, up to the time of the acceleration of the maturity of the debt, are paid, the remaining undue interest coupons are discharged. For the same reason, contrary to the holding of the court, plaintiff is not entitled to recover on its second mortgage of $2,750; for, like the undue coupons, having been executed to secure the payment of interest charged and unearned at the time of the acceleration of the maturity of the debt, it also was discharged. * * *” (Emphasis supplied.)

In Dugan et al. v. Lewis et al., 79 Tex. 246, 14 S.W. 1024, 1026, 12 L.R.A. 93, 23 Am.St.Rep. 332, the principle of law involved here was under consideration in a usury case and the Supreme Court of Texas used this language:

“It is contended that as the deed of trust provides that on failure of the borrower to pay said note, or either of said coupons, or failure to comply with any of "the stipulations contained in said deed of trust, the whole sum of money secured thereby may without notice to the borrower, at the option of the lender or his assigns, and at his option only, be declared due and payable at once, and the trustee was authorized to take possession and sell the land; and as default was made in the payment of the coupon due December 1,' 1887, and the whole amount was declared due, the whole five years’ interest became collectible, according to the terms of the contract, long before the termination of the five years, thus making the interest reserved greater on the happening of the contingency than 12 per cent, per annum, and the contract usurious under the laws of this state. We do not think that a correct construction of the contract will make a greater amount of interest due and collectible upon it than shall have accrued on the principal, calculated up to the date of collection at the rate named in the note, or, in other words, that any unearned interest comes within the proper meaning of the stipulation. * *

In Stubbings v. O’Connor et al., 102 Wis. 352, 78 N.W. 577, 580, the Supreme Court of Wisconsin said:

“* * * Those two coupon notes fell due prior to July 15, 1891, when the plaintiff exercised his option, and declared the whole amount secured by the notes and mortgages as due and payable. By virtue of declaring such option, the whole amount became due and payable; and we perceive no rule of law authorizing interest upon interest which subsequently matured, and which, according to the findings, amounted at that time, in the aggregate, to $683.40. * * * The contract is very exacting and oppressive. While parties must be allowed to make their own contracts, so long as they are made under standingly and not in violation of law, yet there is no reason in the case at bar for allowing interest not specifically provided for in the contract. That portion of the judgment of the circuit court allowing such excess of $683.40 is reversed, * *

In the case of In re Norcor Manufacturing Company, 36 F.Supp. 978, 980, the District Court, for the Eastern District of Wisconsin, had before it a very similar question to that involved in the case at bar, and the court held:

“There is no statutory authority for allowing compound interest on claims that are allowed in bankruptcy. After the filing of a petition, a creditor usually forgets about interest because in the ordinary bankrupt estate there are not sufficient assets to pay the face of the claims. Very occasionally, as here, due to good management or other fortuitous circumstances, the debtor becomes solvent. The only effect of such change in status of the debtor is that the accrual of interest, which was stopped or suspended by the filing of the petition, is in effect reinstated. The suspension of such an accrual of interest is lifted, but all that the creditor is entitled to is the face of his claim, plus accrued interest at the legal rate to the date of payment.”

Counsel for applicant, in support of its position, cite the case of Chase National Bank of City of New York v. Citizens Gas Company of Indianapolis et al., 7 Cir., 113 F.2d 217. A careful examination of the facts in that case makes it clear that it does not apply to the instant case. There the suit was to recover on delinquent and unpaid interest coupons under the deed of trust. Here the Indenture Trustee is claiming interest upon the whole indebtedness at an accelerated maturity date, that date being September 25, 1939, and interest on the unmatured interest coupons. At the date of acceleration there were no delinquent or unpaid interest coupons. The whole indebtedness was by the act of acceleration made to mature on that date. Thereafter the coupons attached to the bonds were discharged and under the plain language of the bond, the interest due would be at the rate of five per cent, per annum from the date of the accelerated maturity, or September 25, 1939, until paid.

The claim of the applicant was duly filed herein as a secured claim on February 10, 1940. It was duly allowed in compliance with the views herein expressed and has been paid in full. I see no reason to construe the order of December 9, 1944, by modification, or to vacate the same as being incorrect, as contended by the applicant.

The application, therefore, is denied and an exception allowed. A form of judgment consistent with this opinion may be submitted within five days from this date.


text:
    FRIEND v. MIDDLE ATLANTIC TRANSP. CO. et al. (FRIEND, Third Party Defendant).
    No. 1178.
    District Court, D. Connecticut.
    April 12, 1945.
    M. J. Blumenfeld and Pelgrift & Blumenfeld, all of Hartford, Conn., for plaintiff.
    Philip R. Shiff, of New Haven, Conn., for defendants and third-party plaintiff.
    Charles H. Blackall, of Hartford, Conn., for third-party defendant.
   SMITH, District Judge.

This action was brought by a resident of Connecticut against a New York corporation and an Ohio resident in the Superior Court for Hartford County for damages for a motor vehicle collision alleged to have been caused by the negligence of the defendants. The action was removed to this court by the New York corporation defendant which thereafter, together with the Ohio citizen defendant, moved to make the husband of the plaintiff, a Connecticut citizen, third-party defendant in the action on the ground that the third-party defendant was, or might be, liable to the plaintiff. The motion was granted and the third-party defendant cited in. Thereupon the plaintiff amended, adding a claim that the collision was also caused by the negligence of the third-party defendant The third-party defendant has filed what he terms a plea to the jurisdiction, moving to dismiss on the ground of a lack of diversity of citizenship between himself and the plaintiff and because no contribution between joint tort-feasors is provided by Connecticut law.

The third-party defendant has also moved to strike out the amendment to the original complaint of the plaintiff on the ground that she had waived the right to amend by her failure to include the third-party defendant as a defendant in the action originally in the state court and on the ground that jurisdiction is lacking in this court because of the lack of diversity of citizenship between the plaintiff and the third-party defendant.

Insofar as the third-party defendant’s position is based upon a lack of power to force the plaintiff to accept the third-party defendant as a party and require the plaintiff to claim against the third-party defendant, under the doctrine of Brown v. Cranston, 2 Cir. 1942, 132 F.2d 631, 148 A.L.R. 1178, the later decision of Bates v. Miller, 2 Cir. 1943, 133 F.2d 645, is squarely against him on the facts of this case, since both in the Bates case and here the original plaintiff has accepted the tender to him of the third-party defendant and has amended to claim against the third-party defendant for alleged negligence. The report of the Bates case, however, as" the third-party defendant herein points out, does not indicate whether the plaintiff and the third-party defendant were of the same citizenship so as to raise the question of the power of the Court to take jurisdiction on the third-party complaint and amendment to the original complaint where diversity of citizenship would' have been lacking if the plaintiff had originally claimed against the third-party defendant as well as the original defendants. Nor were the plaintiff and third-party defendant of the same citizenship in either the Lewis or Dworkin cases, in this district, relied on by the defendants. Lewis v. United Air Lines Transport Corporation, D.C. 1939, 29 F.Supp. 112; Dworkin v. Spector (Wright), D.C.1944, 3 F.R.D. 340.

There is a division of authority on this question and there is some weight in the argument that taking jurisdiction in such a case may provide opportunity for a roundabout entry into the Federal courts in action between citizens of the same state by collusion with the noncitizen original and nominal defendant. This danger, if it exists, at least until it actually appears in practice, should not be allowed to destroy the economy provided by the third-party practice where the plaintiff is willing, as in this case, to determine all the questions growing out of the collision in one action. See 1 Moore, Federal Practice, 781, on the ancillary nature of the third-party proceeding, and see Lewis v. United Airlines Transport Corporation, supra; Satink v. Holland Township, D.C.N.J.1939, 28 F. Supp. 67. United States v. Pryor, D.C.N. D.Ill.1940, 2 F.R.D. 382; Myer v. Lyford, D.C.M.D.Pa.1942, 2 F.R.D. 507; 44 Yale L. J. 1291, 1322, 45 Yale L.J. 393, 417 et seq.; Bossard v. McGwinn, D.C.W.D.Pa.1939, 27 F.Supp. 412.

Moore would not go so far as to take jurisdiction of a plaintiff’s claim against a third-party defendant of the same citizenship. 1 Moore, Federal Practice, 748,— 1944 Supplement, 760, 761 and see Hoskie v. Prudential, D.C.E.D.N.Y.1941, 39 F. Supp. 305, and concurring opinion of Min-ton, J., in People of State of Illinois for Use of Trust Co. of Chicago v. Maryland Casualty Co., 7 Cir. 1942, 132 F.2d 850, 853 ff.

Yet we have in “separable controversy” cases the example of the exercise of Federal jurisdiction over the entire case upon removal based on the existence within the case of a separable controversy between citizens of different states. In third-party practice as well, where the original plaintiff and the original defendant are properly before this court under jurisdiction given by the Constitution and the statutes, it should, so far as jurisdiction over the subject matter is concerned, require no new constitutional or statutory grant of power to enable it to do “final and complete justice as between all parties affected by or liable on account of the same set of facts.” See discussion by Judge Chesnut, Tullgren v. Jasper, D.C.Md.1939, 27 F.Supp. 413.

The plea to the jurisdiction and motion to dismiss of the .third-party defendant, Fred J. Friend, is denied.


author: CONGER, District Judge.

text:
    NEW YORK CREDIT MEN’S ASS’N, Inc., v. DOMESTIC BROADTAIL PRODUCERS, Inc.
    District Court, S. D. New York.
    May 16, 1945.

      I. Jonas Speciner, of New York City (Lewis Herman, of New York City, of counsel), for plaintiff.
    Davidson & Mann, of New York City (Harvey T. Mann, of New York City, of counsel), for defendant.
   CONGER, District Judge.

The plaintiff, as trustee in bankruptcy of Joseph H. Polish, Inc., sues upon two causes of action, alleging respectively, violations of sections 60, sub. a, and 60, sub. b, of the Bankruptcy Act, as amended, 11 U.S.C.A. § 96, sub. a, and sub. b, and of section 44 of the Personal Property Law of New York, Consol.Laws N.Y. c. 41, commonly known as the “Bulk Sales Law.”

The facts are not in dispute. The sole record is based upon testimony taken in an examination of the defendant’s general manager before a referee in bankruptcy, and certain exhibits.

It appears that bankrupt and defendant were wholesale dealers in furs; that prior to January, 1942, the bankrupt had purchased, apparently from time to time, certain skins from defendant. On January 1, 1942, the books of defendant show that bankrupt was indebted to it in the sum of $26,423.44. Then followed the transaction which is now complained of.

In order to give a clear picture of this transaction it might be well to set it forth as it was testified to by defendant’s general manager before the referee in bankruptcy and read into the record of this trial:

“Q. Are you familiar with the transactions concerning the return of merchandise by Joseph H. Polish, Inc., the bankrupt, to Domestic Broadtail Producers, Inc., on or about January 19, 1942? A. I am.
“Q. Tell me the circumstances concerning that return? A. The early part of January I went to see Mr. Polish in regard to settling up his account. He told me he had a quantity of lamb skins that he purchased from us which he would like to return for credit. After talking with him he told us the quantity was around $10,000. to $12,000. We agreed to take these back and give him credit at cost price. He also told us at that time the goods were substantially in the same condition as when we had shipped them to him.”

This conversation took place on or about January 15, 1942, and pursuant thereto and on or about January 19, 1942, the goods were taken possession of by the defendant. They were physically taken by defendant’s chauffeur from the premises of the bankrupt to the premises of defendant. A receipt for the same was given bankrupt, who at the time delivered two itemized statements to defendant listing the merchandise returned and the cost thereof, to wit, a total of 6709 skins at a total cost of $12,803.55.

Later, upon examination it was found that the quality of the skins was not as claimed by the bankrupt; that they were not the original shipment, but inferior odds and ends and leftovers, and the defendant informed the bankrupt in February or March that full credit in the original cost price would not be given. The bankrupt insisted that they were the original lot and requested the credit as agreed. Apparently no further conversations were had in the matter.

In June of 1942 the defendant’s accountants suggested that credit for the return of the skins be entered in the books of the company as otherwise there would be sales without corresponding charges, the defendant having disposed of a small portion of the goods at that time. The agreement heretofore mentioned was explained to the accountants, and they suggested an arbitrary reduction of 20% and that credit be given for the remainder, and this was accordingly done on June 29, 1942, the books reflecting a credit in favor of the bankrupt in the amount of $10,242.84. Credit bills were mailed to the bankrupt and neither party took any further action on the subject.

On July 29, 1942, an involuntary petition in bankruptcy was filed against Joseph H. Polish, Inc., and an adjudication of bankruptcy was entered on August 14, 1942.

The trustee contends that the transaction was clearly a preference in contravention of § 60, sub. a, and in addition is voidable for non-compliance with § 44, New York Personal Property Law.

I believe the first point may be disposed of easily.

Section 60, sub. a, states in part that a “preference is a transfer * * * of any of the property of a debtor to or for the benefit of a creditor for or on account of an antecedent debt, made or suffered by such debtor while insolvent and within four months before the filing by or against him of the petition in bankruptcy, * * * the effect of which transfer will be to enable such creditor to obtain a greater percentage of his debt than some other creditor of the same class.”

In applying this part of the statute it is clear that the return of the skins on January 19, 1942, over six months before the filing of the petition in bankruptcy, is not within its purview unless some other factor changes the effect of the transaction.

The trustee argues that the issuing of credit only a month before the filing of the petition is such a factor. I think not.

Both parties treat the transaction as a resale, which it was, and contest the question of when the title to the skins passed. If title passed when the credit was issued, then the transaction effected a preference; if it passed upon the return date, the statute is inapplicable, it is said.

The answer to the issue is found in the definition of a “transfer.”

Section 1(30) of the Bankruptcy Act, 11 U.S.C.A. § 1(30), states that a “‘transfer’ shall include the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or with an interest therein or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily, or involuntarily, by or without judicial proceedings, as a conveyance, sale, assignment, payment, pledge, mortgage, lien, encumbrance, gift, security, or otherwise.”

Now it is certain from the plain terms of this section that the return of the skins was a “transfer” more than six months before the filing of the petition, and it is of no significance what the transaction is denominated, whether a sale or something else. It was a “transfer.”

This view is fortified by the concluding portion of § 60, sub. a, which states that: "For the purposes of subdivisions a and b of this section, a transfer shall be deemed to have been made at the time when it became so far perfected that no bona-fide purchaser from the debtor and no creditor could thereafter have acquired any rights in the property so transferred superior to the rights of the transferee therein, * *

The possession of the goods on and after January 19, 1942, would have been effective even as a pledge against any third parties by reason of the fact of the outstanding debt existing at the time.

The trustee would make much of the fact that in April, May and June, the defendant was aware of certain judgments against the bankrupt, but these were entered after the transfer, and do not indicate any fraudulent motive, especially in view of the fact that no proof of actual fraud was offered.

The case of J. Landis Shoe Co. v. Hudson, 8 Cir., 32 F.2d 897, decided the question of the time of passage of title for the reason that some of the merchandise in that suit was shipped within the four month limit. It doesn’t help plaintiff here. Incidentally in this case it was stated that entry of credit on the books of the respective parties was not material.

I hold that there is no violation of sections 60, sub. a, and 60, sub. b, of the Bankruptcy Act.

The plaintiff’s second point is more difficult.

Originally, it pleaded only the cause of action involving the Bankruptcy Act, and the case was tried on that theory. After trial and before decision, the plaintiff was granted permission to amend its pleading to conform to the proof, and a second cause of action involving § 44 of the New York Personal Property Law was added. At my suggestion, plaintiff served an amended complaint to which defendant answered. I also gave defendant permission to submit additional proof if he so desired. Naturally in the evidence on the trial there would not be formal proof of a violation of § 44, but the defendant has conceded that it made no compliance with the statute, claiming that the transaction never was a bulk sale as contemplated by § 44. It is obvious from the record that there were creditors at the time of the transaction who still remain such. At any rate I feel I should dispose of the question on the merits.

Section 44(1) declares that the “sale, transfer or assignment in bulk of any part or the whole of a stock of merchandise or of fixtures, or merchandise and of fixtures pertaining to the conducting of the business of the seller, transferrer or assignor, otherwise than in the ordinary course of trade and in the regular prosecution of said business, shall be void as against the creditors of the seller, transferrer or assignor * * * ” unless certain steps are taken to notify creditors of the impending transfer, and to give them opportunity to protect their interests if threatened.

The facts then present two problems: Was this a sale in bulk? Was it without the ordinary course of trade?

There seems to be no authoritative decisions in New York which directly define a bulk sale. In all the cases that have come to my attention, the entire stock, or substantially the entire stock, of the merchant was transferred. But the phrase “any part or the whole” is certainly subject to the interpretation that the size of the transfer is insignificant. However, without deciding this point, I think the decision may rest on the answer to the second question.

“Ordinary course of trade” has not been construed with uniformity by the courts of the various states, and New York again appears to lack authority on the point.

It has been said that “this inquiry is essentially an issue of fact depending upon the nature of the seller’s business, his ordinary method of making sales, and his indebtedness.” Hart v. Brierly, 189 Mass. 598, 601, 76 N.E. 286, 287; and cf. Irving Trust Co. v. Rosenwasser, D.C., 5 F.Supp. 1016; and this seems to be a logical rule. Conceivably, a sale by one merchant in the ordinary prosecution of his particular business would not be considered normal conduct by a different type of merchant engaging in a similar transaction. See Shasta Lumber Co. v. McCoy, 85 Cal.App. 468, 259 P. 965.

An excellent analysis of bulk sales statutes in 35 Mich.L.Rev. 732 includes the following at page 737:

“The cases which have decided that a particular transaction was or was not out -of the ordinary and usual course of the business of the seller have one common element; the sale or transfer was made to one who was not a member of the general class of buyers to whom the business customarily catered. While this determination of the buyer’s character is by no means to be understood as a complete test, nevertheless, it is a most persuasive element in the decisions.”

A study of the New York cases substantiates this proposition.

In the instant suit, both parties were wholesalers. The bankrupt suggested the return of certain skins for credit. He had evidently used many of the better skins in the lot. The defendant accepted the skins. I find it impossible to hold as a matter of fact or law that this was not in the ordinary course of the bankrupt’s trade. The parties had had dealings before. If the defendant had suggested the return of the skins because of a pressing need for them, no complaint would be made. The actual situation appears no different. I find in view of all the circumstances that the transfer was not without the ordinary course of the business of the bankrupt, and that therefore, compliance with § 44 was unnecessary.

The situation in Geiger v. Louis Yasser Inc., 178 Misc. 526, 35 N.Y.S.2d 221, affirmed 265 App.Div. 1046, 40 N.Y.S.2d 332, was obviously different. In addition the discussion of this point was “academic.”

Complaint dismissed and judgment for defendant.