author: NORDBYE, District Judge.

text:
    In re SCHNABEL.
    No. 17080.
    District Court, D. Minnesota, Fourth Division.
    July 3, 1945.

      G. Halvorson, of Minneapolis, Minn., for bankrupt.
    Joseph C. Vesely, of Hopkins, Minn., for objecting creditors.
   NORDBYE, District Judge.

This matter came on for hearing on petition of the bankrupt for review of an order of the Referee denying his discharge.

The Referee has succinctly stated the question presented for review as follows: “That the question presented for review is whether, in a no-asset case, discharge can be denied where the Referee is satisfied that the bankrupt has committed an offense punishable by imprisonment, to wit, the offense of having knowingly and fraudulently made a false oath in or in relation to his bankruptcy proceeding, in this: that in his original petition in said proceeding bankrupt declared under oath that Schedule A, annexed to his petition, contained a full and true statement of all his debts, and so far as it is possible to ascertain, the names and places of residences of his creditors, and in his oath to said Schedule A declared that said schedule is a statement of all his debts, when in fact, at the time the bankrupt signed and made oath to his said petition and schedule, and for some time previous thereto, bankrupt had numerous creditors, whose names and addresses he well knew, as well as the amount of his indebtedness to each of them, all of which bankrupt knowingly, deliberately, intentionally, and wilfully omitted from his said petition and schedule, without any justification or excuse therefor.”

Referee Heisey, with commendable care and industry, has set forth his views in the findings of fact and conclusions of law and an extended memorandum. There is naught to be gained by amplifying that which he has so fully and painstakingly stated. Suffice it to say that when a bankrupt deliberately and intentionally makes a false oath in his petition and schedules with reference to his creditors and knowingly, intentionally and wilfully omits from his petition and schedules numerous creditors without any justification or excuse, there should be only one rule which should guide a bankruptcy court in passing upon an objection to his discharge predicated upon such false oath, and that is, that the objections to the discharge must be sustained. This is not a situation where mistake, ignorance, inadvertence or misunderstanding has occasioned the false oath. The Referee has found the falsity in the petition and schedules to be deliberate, intentional and wilful. It cannot be gainsaid, therefore, that the bankrupt wilfully and intentionally committed perjury. That fraud has been perpetrated on the Court on account thereof seems self-evident.

The following are the findings of fact, conclusions of law, and memorandum of the Referee:

“Findings of Fact
“1. On August 8th, 1944, bankrupt signed and made oath to his debtor’s petition and to Schedule A annexed thereto which oath was authorized by the Bankruptcy Act and was taken by bankrupt before and administered to bankrupt by a competent officer duly authorized to administer same under the Bankruptcy Act.
“2. On August 14th, 1944, said petition, with said Schedule A annexed thereto, so signed and sworn to by bankrupt, were duly filed in the office of the Clerk of United States District Court for the District of Minnesota, Fourth Division.
“3. On August 14th, 1944, said District Court duly referred above entitled proceeding to the late Horace H. Glenn, then Referee in Bankruptcy.
“4. On August 14th, 1944, Referee Glenn duly entered an order, adjudging petitioner a bankrupt under the Bankruptcy Act.
“5. In bankrupt’s original petition in this proceeding, he declared under oath that ‘the schedule hereto annexed, marked Schedule A, * * * contains a full and true statement of all his debts, and, so far as it is possible to ascertain, the names and places of residence of his creditors * * *’ and in his oath to Schedule A annexed to his original petition, bankrupt declared that ‘said schedule is a statement of all of my debts. * *
“6. At the time bankrupt signed and made oath to his debtor’s petition in this proceeding and to Schedule A thereto annexed, and for some time previous thereto, he had the following actual creditors in addition to those shown in Schedule A annexed to his original petition:
“(1) Dr. H. E. Drill, of Hopkins, Minnesota, to whom he owed $117.00
“(2) Kokesh Hardware Company, of Hopkins, Minnesota, to whom he owed $10.00
“(3) Len Milbert, of Hopkins, Minnesota, to whom he owed $70.00
“(4) Eldoro Johnson, of Hopkins, Minnesota, to whom he owed $26.00
“(5) Reuben (R. G.) Guttormson, of Minneapolis, Minnesota, to whom he owed $1,000.00
“(6) Harold Leitzow, to whom he owed $70.00
“(7) Dr. I. H. Picha, of Hopkins, Minnesota, to whom he owed $4.00
“(8) Gately Clothing Company, to whom he owed $19.00, and
“(9) Albin Alberg, to whom he owed $57.00.
“7. At the time this bankrupt signed and made oath to his debtor’s petition in this proceeding and to Schedule A thereto annexed he well knew that the persons and firms whose names and places of residence appear in Finding 6 hereof, to whifch reference hereby is made, were then and for some time previous thereto had been his creditors.
“8. At the time this bankrupt signed and made oath to his debtor’s petition in this proceeding and to Schedule A thereto annexed he knowingly, deliberately, intentionally, and wilfully, omitted therefrom the listing and the names and places of residence of nine of his creditors whose names and places of residence appear in Finding 6 hereof, to which reference hereby is made, said omission by him then and there being inexcusable and unjustifiable.
“9. On September 8th, 1944, bankrupt signed and made oath to and thereafter filed a petition to amend Schedule-A, annexed to his original petition, to include in said original Schedule A the names and places of residence of eight of his creditors, mentioned in Finding 6 hereof, to which reference hereby is made, originally omitted therefrom as aforesaid.
“10. On September 21st, 1944, Horace H. Glenn, then Referee in Bankruptcy, made an order authorizing the amendment prayed for in bankrupt’s petition mentioned in Finding 9 hereof, to which" reference hereby is made.
“11. The listing by bankrupt in his original Schedule A annexed to his original petition, of all of his creditors, together with their places of residence, was a material matter in and in relation to this bankruptcy proceeding and bankrupt’s omission in that regard, as stated and found in the foregoing Finding, to which reference hereby is made, was a material matter in and in relation to this bankruptcy proceeding.
“12. Bankrupt’s declaration under oath in his original petition that the Schedule thereto attached, marked Exhibit A, contains a full and true statement so far as it is possible to ascertain, of the names and places of residence of his creditors related to a material matter in this bankruptcy proceeding and bankrupt’s said declaration under oath was wilfully false and contrary to his oath and was known and believed by bankrupt to be untrue at the time he signed and made oath to his original petition and original Schedule A thereto annexed.
“13. Bankrupt in the premises stated in the foregoing Findings, to which reference hereby is made, knowingly, deliberately, and intentionally practiced and perpetrated deceit upon the United States District Court for the District of Minnesota and upon the Referee in Bankruptcy to whom above proceeding was referred.
“14. Bankrupt’s acts and conduct, in the premises stated in the foregoing Findings, to which reference hereby is made, dishonestly interfered with and disrupted the due and proper administration of the affairs involved in above bankruptcy proceeding and in the estate of bankrupt, and impaired the lawful functions of the Referee in Bankruptcy to whom above proceeding was referred.
“15. Bankrupt, in the premises stated in the foregoing Findings, to which reference hereby is made, knowingly and wilfully suppressed and concealed material information and facts which the United States District Court and the Referee in Bankruptcy were legally entitled to know and which the bankrupt wás required by law to furnish said Court and Referee.
“16. Bankrupt, in the premises stated in the foregoing Findings, to which reference hereby is made, deliberately, wil-fully, and knowingly deprived his creditors, whose names and places of residence he omitted from his original Schedule A, of the right to notice of and participation in above proceeding and bankruptcy estate.
“Conclusions of Law
“1. On August 8th, 1944, bankrupt committed an offense punishable by imprisonment as provided under the Bankruptcy Act in that he knowingly and fraudulently made a false oath in and in relation to this proceeding under the Bankruptcy Act in this, to wit, that on the date aforesaid the bankrupt subscribed to a declaration under oath in his original debtor’s petition in this proceeding that the schedule annexed to said petition, marked Schedule A, contained, so far as it was possible to ascertain, the names and places of residence of his creditors, whereas, in truth and in fact, bankrupt deliberately, intentionally, wil-fully and contrary to his oath omitted from such schedule certain material matter, to wit, the names and places of residence of at least nine of his creditors which then and there were and for some time previous thereto had been well known to him and to each of whom he then and there was and for some- time previous thereto had been indebted in amounts ranging from $4.00 to $1,000.00, as he then and there well knew.
“2. Bankrupt, having demonstrated his dishonesty as aforesaid, should be granted no favor.
“3. Bankrupt, by virtue of the premises aforesaid, is not entitled to be discharged in this-bankruptcy proceeding from his obligations.
“Dated April 10, 1945.
“Geo. A. Heisey
“Referee in Bankruptcy.
“Memorandum
“Fraud Element. It is contended seriously by bankrupt that there is no basis in the evidence in this case for a finding that bankrupt ‘fraudulently’ made a false oath in or in relation to this bankruptcy proceeding and that inasmuch as there are no assets in this estate no fraud upon creditors could possibly result from the bankrupt’s conduct.
“Section 14,. sub. c, of the Bankruptcy Act, 11 U.S.C.A. § 32, sub. c, provides: ‘The court shall grant the discharge unless satisfied that the bankrupt has (1) committed an offense punishable by imprisonment as provided under this Act; * * * while Section 29, sub. b, of the Bankruptcy Act, 11 U.S.C. § 52, sub. b, provides: ‘A person shall be punished by imprisonment * * * upon conviction of the offense of having knowingly and fraudulently * * * (2) made a false oath or account in or in relation to any proceeding under this Act; * * *.’
“I am perfectly satisfied in my own mind that Congress, in enacting the above provisions, intended that the court or referee should not grant a discharge to a bankrupt when satisfied that the bankrupt has committed perjury and that resultant fraud upon his creditors is wholly immaterial, for the reason that perjury in itself imports a dishonest or corrupt motive and involves moral turpitude.
“Furthermore, it is reasonable to say that Congress intended that there must be a full, complete and honest disclosure by a bankrupt to the court or referee of all his assets, liabilities and business transactions, and that when a bankrupt knowingly, deliberately and intentionally fails to make such disclosure, he is not entitled to be discharged of his obligations.
“It would seem insensate to claim that a bankrupt can render himself liable to prosecution under Section 125 of the United States Criminal Code, 18 U.S.C.A. § 231, defining the crime of perjury, and that on identical proof a bankrupt cannot be prosecuted for the crime of perjury under the Bankruptcy Act, simply for the reason that Section 125, C.C. does not embrace the word ‘fraudulently’ whereas Section 29 of the Bankruptcy Act employs it. And it would be equally absurd to say that a bankrupt cannot commit perjury' in an asset case without suffering the consequences but can commit perjury in a no-asset case with impunity.
“In Hammer v. United States, 271 U.S. 620, 46 S.Ct. 603, 70 L.Ed. 1118, the defendant was adjudged a bankrupt and the proceeding was referred to a referee. Subsequently the bankrupt was made a defendant in a criminal prosecution, the charge being that the bankrupt suborned perjury by inducing one Trinz to take an oath before the referee and there falsely to testify that prior to the filing of the petition he, Trinz, had loaned the bankrupt $500 and that the bankrupt had given his note therefor. The bankrupt contended that the taking of a false oath in bankruptcy is not perjury and that, without perjury, there could not be subornation of perjury. The Supreme Court pointed out (1) that Section 125, C.C. provided: ‘That whoever, having taken an oath before a competent officer, in any case in which a law of the United States authorizes an oath to be administered, that he will testify truthfully, shall state any material matter which he does not believe to be true, is guilty of perjury, and shall be fined not more than $2,000 and imprisoned for not more than five years,’ and (2) that Section 29, sub. b of the Bankruptcy Act provides that a person shall be punished by imprisonment not to exceed two years upon conviction of the offense of having knowingly made a false oath in any proceeding in bankruptcy; and the Supreme Court said:
“ ‘It is plain that the offense charged includes perjury as defined by section 125. That section is in general terms and is broad enough to apply to persons sworn in bankruptcy proceedings. The facts alleged include all the elements of that offense, as well as the making of a false oath in bankruptcy, and they show a violation of both sections. The indictment does not specify the section under which it is drawn, but the omission is immaterial.’
“In Epstein v. United States, 7 Cir., 196 F. 354, it was held false swearing in bankruptcy proceedings constituted ‘perjury’ within Sections 125 and 126 of the United States Criminal Code, 18 U.S.C.A. §§ 231, 232, and it was further held that Section 29 of the Bankruptcy Act of 1898 merely changed the punishment for perjury committed in bankruptcy proceedings.
“In Wechsler v. United States, 2 Cir., 158 F. 579, the court held that the provision made in Section 29, sub. b (2) of the Bankruptcy Act, providing for the punishment of anyone who wilfully and fraudulently makes a false oath in or in relation to any proceeding in bankruptcy does not create a new offense, but merely prescribes a different penalty for the crime of perjury when committed in bankruptcy proceedings.
“The following recent authority is on all fours with the case at bar and the court’s attention hereby is directed specially to it:
“In re Steinberg, 2 Cir., 143 F.2d 942, 943, it was held:
“1. That the finding of a bankruptcy-referee that the bankrupt knowingly made a false oath was binding upon the Appellate Court;
“2. That an intentional untruth by a bankrupt in a matter material to the issue which is itself material is sufficient to prevent discharge, without proof of any fraudulent purpose;
“3. That evidence that bankrupt knowingly omitted certain creditors from the schedule of debts annexed to his petition in bankruptcy required denial of discharge, without proof as to any fraudulent purpose.
“In this case objection to bankrupt’s discharge was that he had knowingly and fraudulently made an oath in his petition in bankruptcy that the schedules annexed thereto contained a full and true statement of all his debts and the names of all his creditors, whereas, in truth and in fact, the bankrupt knowingly and wilfully omitted from the schedules the names and addresses of, and the debts owing to, five creditors. Three of those creditors were brothers-in-law of the bankrupt who had made loans to him. A fourth creditor was an insurance agent who had advanced premiums to bankrupt on his promise to repay them. A fifth creditor was the State Tax Commission with a judgment for unpaid taxes.
“At the hearing, the bankrupt testified that his brothers-in-law had released their claims before bankruptcy; that he had told his lawyer, who prepared the schedules, of the insurance agent’s claim but that the lawyer had inadvertently omitted it; that a title search had failed to reveal the judgment of the Tax Commission and he had known of no claim by the Commission against him for taxes; that he had relied upon his lawyer and had signed the schedules without reading them.
“The referee found that the bankrupt did not inadvertently omit the claims of his brothers-in-law but deliberately excluded them from the schedules ‘for the purpose of preferring them over other creditors’; that there was no evidence other than the bankrupt’s testimony to warrant the conclusion that those debts had been cancelled; that the referee did not believe the bankrupt’s testimony that they were cancelled; that the omission of the claim of the insurance agent was inexcusable and could not be regarded as inadvertent because the bankrupt signed the schedules without reading them; that the failure to list as a creditor the State Tax Commission was an act of unjustifiable carelessness since the bankrupt knew or should have known of the existence of that claim; and that the bankrupt’s amendment of the schedules, after the filing of the specifications, was irrelevant. Accordingly, the referee entered an order denying the discharge.
“The court said: ‘The referee’s finding that the bankrupt “knowingly” made a false oath binds us, for the referee saw and heard the bankrupt testify and we cannot, therefore, go behind his conclusions as to credibility. The only question is whether the oath was “fraudulently made.” We would be inclined to say no, if this were a case of first impression; as the bankrupt had no assets, the omission of the claims of his relatives could not have been-designed to prefer them, and it is difficult to perceive any fraudulent purpose, either in those omissions or the failure to include the claim for taxes. Perhaps the omission of the insurance agent’s claim shows a fraudulent purpose. But we need not consider that question. For we bow to the precedents which, in practical effect, have read the word “fraudulently” out of the statute by the use of the phrase, “an intentional untruth in a matter material to the issue which is itself material.” (Citations). Under those authorities it is enough that the false oath here was knowingly made.’
“In the Slocum case reported in 2 Cir., 22 F.2d 282, 285, the false oath relied upon by the objecting creditor consisted of testimony given by the bankrupt upon his examination before the referee at the first meeting of his creditors. The court held that the materiality of a false oath does not depend upon whether, in fact, the falsehood was detrimental to the creditors.
“Among other things, the court said:
“ ‘While the statute does not withhold a discharge from a bankrupt who has testified falsely through error, its benefits are intended only for honest debtors. Those who purposely answer untruthfully concerning material matters propounded upon their examination deserve no favor. ■ * * *
“ ‘The words of the statute requiring that the testimony be given “knowingly and fraudulently” mean no more than “an intentional untruth in a matter material to the issue which is itself material.” (Citations). The matter of intent is proved by inference.’
“ ‘Fraudulently’ does not mean necessarily ‘with intent to defraud creditors.’ If it was intended thus to restrict its meaning, Congress would have used apt language to accomplish that result. It would seem, therefore, that the term ‘fraudulently’ should be given a broad significance, if it was intended that it should have any at all.
“Section 7, sub. a(8) of the Bankruptcy Act, 11 U.S.C.A. § 25, sub. a(8), provides that the bankrupt ‘shall * * * prepare, make oath to, and file in court * * * with his petition, if a voluntary bankrupt, a schedule of his property, showing the amount and kind of property, the location thereof and its money value, in detail; and a list of all his creditors * * * showing their residences, if known, or if unknown that fact to be stated, the amount due to or claimed by each of them * * Thus Congress imposed upon the bankrupt the duty, not only of scheduling his assets in detail, but also of scheduling his liabilities in detail, and the latter duty would seem to be as imperative as the former duty.
“It is the law that fraud may consist of intentional suppression or concealment of the truth as to material facts. United States ex rel. Percas v. Karnuth, D. C.N.Y., 28 F.Supp. 597.
“Even in a case which purports to have no assets therein according to the petition and schedules, the bankrupt’s creditors have the right to participate in the proceeding nevertheless. Where a bankrupt knowingly fails to schedule his liabilities, the creditors thus omitted are deprived of that right. There is always the possibility at least that some asset or assets belonging to the bankrupt may be discovered somehow. In a case where there are unscheduled liabilities, even though it is determined ultimately that there are no assets, the failure of the bankrupt to show all his creditors results in disorder and confusion in the proceeding when the fact is discovered. An amendment to the petition, additional notices to the unscheduled creditors, and a further examination of the bankrupt normally would be required. One can readily see where if the proceeding had progressed substantially, the discovery of the bankrupt’s dereliction might disrupt entirely the orderly admin-stration of his affairs in bankruptcy.
“It has been held repeatedly that while ‘fraud upon the United States’ means primarily to cheat the government out of property or money, nevertheless it also means to dishonestly obstruct, interfere with or impair any lawful function of the government. Haas v. Henkel, 216 U.S. 462, 30 S.Ct. 249 54 L.Ed. 569, 17 Ann.Cas. 1112; Hammerschmidt v. United States, 265 U.S. 182, 44 S.Ct. 511, 68 L.Ed. 968. It does not seem too extravagant to say that where a bankrupt knowingly and intentionally violates his statutory duty and thus interferes with and disturbs the due and orderly administration of the bankruptcy law and of his estate in bankruptcy, he thus perpetrates a fraud upon the bankruptcy court or upon the referee in bankruptcy.
“In United States v. De Francis, 60 App. D.C. 207, 50 F.2d 497, involving a naturalization proceeding, the petitioner concealed the fact of previous conviction for sale of liquor and the court held that it constituted ‘a fraud upon the court.’
“In Aronofsky v. Bostian, 8 Cir., 133 F. 2d 290, 292, the bankrupt concealed the fact of a prior bankruptcy proceeding and in its opinion the Appellate Court referred to ‘a fraud upon the court.’ This case is dealt with more extensively hereinafter.
“However, in the Goldman case, reported in 2 Cir., 37 F.2d 97, 98, where the bankrupt, as the heir of his father, failed to disclose honestly and wholly his knowledge of the extent of his father’s estate, the court pointed out that ‘the materiality of the false testimony was not dependent upon the extent, or even the fact, of its being harmful to the creditors,’ and in Re Marshall, 2 Cir., 47 F.2d 209, 210, the court said ‘that a motive for such false swearing is not altogether plain is of no moment whatever. It is enough that the bankrupt intentionally testified falsely on a material matter on a material issue.’ Our own Eighth Circuit Court of Appeals in Aronofsky v. Bostian, supra, discussed hereinafter, held that in order to justify denial of a discharge, it is not necessary that the bankrupt who swears falsely in a material matter shall understand at the time all of the consequences, advantageous or detrimental, that may flow from the act of false swearing.
“There is one case in our own Eighth Judicial Circuit which, at first blush, might give the impression that the fraud element is essential. This case, however, reconciles itself when read with the paramount consideration in mind that the court there dealt with the proposition that there was no perjury involved for the reason that the testimony, alleged to have been knowingly false, did not relate to a material matter. If the alleged false testimony had related to a material issue, there would seem to be no doubt that our Court of Appeals would have affirmed the District Court and the referee on the theory that the bankrupt had committed actual perjury, which, in itself, is sufficient upon which to predicate a denial of discharge. The case is that of Willoughby v. Jamison, 8 Cir., 103 F.2d 821, 823, certiorari denied, 308 U.S. 588, 60 S.Ct. 111, 84 L.Ed. 492, where the referee recommended that the petition for discharge be denied and the District Court confirmed his action, the Appellate Court reversing the District Court. The objection to discharge was that the bankrupt upon general examination before the referee at the first meeting of his creditors gave false testimony under oath in respect to the source from which his wife obtained funds with which she purchased a certain farm. It appeared that the bankrupt, in so testifying, endeavored merely to protect a confidence reposed in him by his wife and that the bankrupt had no pecuniary interest whatever in the farm. The exception to the referee’s report was based on the contention that the false statement was not material for the reason that it did not relate to the bankruptcy estate. The Appellate Court, in substance, held that this exception was well taken. The court said:
“ ‘The general rule is that when an application for discharge is made by a bankrupt in the district court, the judge of that court is, by the terms of the statute, bound to grant it, unless upon investigation it appears that the bankrupt has committed one of the six offenses specified in the bankruptcy act. * * *
“ ‘It is true that in a proper case the materiality of the false oath is not dependent upon injury to creditors. * * *
“ ‘Further, the evidence does not sustain -the charge that the falsehood with reference to the source from which his wife obtained her money was “fraudulently” made. The burden was upon the objecting creditor to prove not only that the false testimony was knowingly made, but that it constituted an offense “punishable by imprisonment.” * * * There must be proof of actual fraud. In re Morrow, D.C., 97 F. 574. The falsehood must be intended to mislead the creditors as to some fact material for creditors to know. Otherwise it is not fraudulent within the meaning of the statute. * * * But the burden was upon the objecting creditor to produce evidence from which a corrupt motive or intent could be inferred. The offense charged was one involving moral turpitude. * * * The record as a whole tends to show that the bankrupt’s motive was to protect his wife’s confidence * * *. Aside from the knowingly false character of the testimony the evidence does not reveal a single element of fraud' * * *.’
“In a later case, however, our Circuit Court of Appeals makes itself clearer, although it does refer to a ‘fraud upon the court and upon appellant’s creditors’, the real tenor of the opinion being to the effect, however, that it suffices that the bankrupt knows what is true, and, so knowing, wilfully and intentionally swears to what is false. I refer to the case of Aronofsky v. Bostian, 8 Cir., 133 F.2d 290, (mentioned hereinbefore) wherein the court held:
“1. That a false oath made by a bankrupt in relation to proceedings in bankruptcy, sufficient to justify denial of discharge, must be ‘knowingly and fraudulently’ made, that is, it must contain all elements involved in perjury at common law, namely, an intentional untruth in a matter material to an issue which is itself material;
“2. That in order to justify denial of a discharge, it is not necessary that a bankrupt who swears falsely in a material matter to an issue before a court shall understand at the time all of the consequences, advantageous or detrimental, that may flow from the act of false swearing, but it suffices that a bankrupt knows what is true and, so knowing, wilfully and intentionally swears to what is false.
“3. That a bankrupt falsely swore in his statement of affairs, accompanying his petition in bankruptcy, that no proceeding under the Bankruptcy Act had been brought by or against him during six years immediately preceding the filing of the petition, so as to require denial of discharge, was not ‘clearly erroneous’ so as to justify reversal.
“In this case the referee in bankruptcy denied the discharge in bankruptcy. The District Court sustained the order of denial and the Appellate Court affirmed, saying (page 292 of 133 F.2d) :
“ ‘ * * * Appellant’s false statement was adapted to, and if it had not been discovered and refuted would have worked a fraud upon the court and upon appellant’s creditors in Boston, and he presents no fact or circumstance which tends to excuse or explain the falsity or to reconcile his act in making the statement with an honest intent so that the inference drawn by the trier of the facts that it was fraudulently done can not be deemed unjustified. It is not necessary that one who swears falsely in a matter material to an issue before a court shall understand and appreciate at the time all of the consequences, advantageous or detrimental, that may flow from the act of false swearing. It suffices that he knows what is true and so knowing wilfully and intentionally swears to what is false.’
“Sufficiency of Specification of Objections. Bankrupt’s attorney admitted due service of a copy of the Specification of Objections on December 7, 1944. On December 30, 1944, notice of hearing on the objections was given, the date of such hearing being fixed as of February 1, 1945, on which date the hearing opened. At no time prior to the hearing did the bankrupt interpose any written motion to dismiss the objections or any demurrer thereto on the ground of their legal insufficiency.
“As a matter of fact the only objection made to the Second Objection (with which we are here concerned) was made orally by bankrupt’s attorney, apparently as an afterthought, during the course of the hearing, when he moved to strike out the Second Objection on the ground that the objector failed to allege that the bankrupt ‘fraudulently’ omitted the creditors’ names, alleging only that he wilfully and intentionally omitted them.
“The objection sustained in this case, as made by the objecting creditor, is that ‘the bankrupt has committed an offense punishable by imprisonment as provided under the Bankruptcy Act in that he knowingly and fraudulently made a false oath or act in or in relation to his proceeding under the Bankrupt Act in that in his petition to be adjudicated a bankrupt and the schedules thereunto attached said bankrupt did intentionally and wilfully omit from the list of his creditors the following:’ (Here follows a specification of the names and addresses of nine certain creditors).
“Accordingly it will be observed that objector adopts the language of Section 29, sub. b(l), 11 U.S.C.A. § 52, sub. b(l), employing the words ‘knowingly and fraudulently” in connection with the alleged false oath and then proceeds to plead details to inform the bankrupt of the charge he has to meet.
“The bankrupt made no claim that the informative matter pleaded was insufficient to apprise him of the charge with which he was confronted. As a matter of fact, as stated before, the only contention ever made by the bankrupt before the referee as to the alleged insufficiency of the objection specified is, in substance, that the word ‘fraudulently’ should have been repeated in connection with the pleading of informative matter. I do not believe that the objector, after employing the identical language of the statute, was required in the merely informative allegations to again employ the word ‘fraudulently’. In my opinion the words ‘intentionally and wil-fully’ used in pleading the bankrupt’s omission of creditors is sufficient.
“In Wolstein v. United States, 8 Cir., 80 F.2d 779, the court held that ‘wilfully’ as in an indictment for removing and concealing non-tax paid distilled spirits means intentionally and also connotes knowledge. As has been illustrated in the early part of this memorandum, it suffices that the bankrupt knowingly committed perjury. See particularly Aronofsky v. Bostian, discussed in the first part of this memorandum.
“However, the specification in consideration here is similar to that which was attacked in Remmers v. Bank, 8 Cir., 173 F. 484, 486, where it was held that a specification of objection to the discharge of a bankrupt on the ground that he had made a false oath to his schedules is sufficient where it alleged that such schedules contained no mention of certain stocks or of any interest therein or claim against any third person on account of same. The court said:
“ ‘It has been held to be error, in specifying objections in opposition to a bankrupt’s application for discharge, to merely follow the language of the act. The rule is the facts relied on to prevent a discharge must be pleaded with sufficient certainty of detail as to apprise the bankrupt of the charge he has to meet and to enable the court to understand the issue to be examined and determined by it.’
“And the court further said: ‘Again, as has been seen from the statement made, the bankrupt did not except to the form of this objection for the purpose of testing its sufficiency in law, but joined issue thereon and proceeded to trial, treating the objection made as sufficient in the trial court.’
“Measure of Proof. Bankrupt contends that in a discharge denial case the same high degree of proof is required as in a criminal prosecution.
“The Act itself, Section 14, sub. c, 11 U.S.C. § 32, sub. c, implies that if the referee is ‘satisfied’ that the bankrupt has committed an offense punishable by imprisonment, he shall not grant a discharge.
“In Remmers v. Bank, 8 Cir., 173 F. 484, it was held that to justify denial of a bankrupt’s discharge on the ground that he made a false oath to his schedules, the evidence must be of sufficiently clear and convincing character to overcome the presumption of his honesty; but that it is not required to be of the high degree necessary to sustain a conviction for perjury.
“In this connection see the proviso at the end of Section 14, sub. c(7) of the Bankruptcy Act ‘that if, upon the hearing of an objection to a discharge, the objector shall show to the satisfaction of the c’ourt that there are reasonable grounds for believing that the bankrupt has committed any of the acts which, under this subdivision c, would prevent his discharge in bankruptcy, then the burden of proving that he has not committed any of such acts shall be upon the bankrupt.’
“Recantation. The petition in this case was filed August 14, 1944, having been signed and verified by the bankrupt on August 8, 1944. After the first meeting of creditors on September 8, 1944, where the bankrupt’s dereliction of duty was discovered, the bankrupt on September 21, 1944, filed an amendment to his petition and schedules setting forth the names and addresses of eight certain creditors, as well as the amounts owed them respectively, which he had omitted from his original petition and schedules.
“The filing of the amendment in this case does not expunge the original offense.
“In United States v. Norris, 300 U.S. 564, 57 S.Ct. 535, 81 L.Ed. 808, the court held that a witness who commits perjury cannot purge himself of the offense by subsequently recanting and that the crime of perjury is complete when a false statement has once been made.
“In United States v. Margolis, 3 Cir., 138 F.2d 1002, the court held that if the bankrupt’s original answer at a hearing before a referee in a bankruptcy proceeding was knowingly false, the crime of making a false oath in a bankruptcy proceeding was complete and it could not be expunged by a subsequent recanting.”

The Court adopts the findings of fact, conclusions of law and memorandum of the Referee above recited, and his order denying the discharge of the above named bankrupt is hereby affirmed. It is so ordered.

An exception is allowed to the bankrupt.


source: Caselaw Access Project

author: HUTCHESON, District Judge.

license: Public Domain

text:
    ROLES v. SCHOOL BOARD OF CITY OF NEWPORT NEWS et al.
    No. 6.
    District Court, E. D. Virginia, Newport News Division.
    May 25, 1945.

      Leon A. Ransom, of Washington, D. C., and R. Wendell Walker, of Newport News, Va., for plaintiffs.
    Allan D. Jones and Charles E. Ford, both of Newport News, Va., for defendants.
   HUTCHESON, District Judge.

In 1942 a suit was instituted by the plaintiffs, Dorothy E. Roles and Newport News Negro Teachers’ Association against the School Board of the City of Newport News, and Joseph H. Saunders, Superintendent of Schools of Newport News. Complainants alleged: That Dorothy E. Roles, a person of African descent and of Negro blood, is a teacher in the public schools maintained and operated by the School Board of the City of Newport News; that the Newport News Negro Teachers’ Association, a voluntary unincorporated association, is composed of Negro teachers and principals in the colored schools of Newport News, Virginia; that the suit is brought on behalf of the plaintiff, Roles, and also on behalf of other persons who are teachers and principals in the colored schools of Newport News, similarly situated and affected; that the defendant School Board is an administrative department of the State of Virginia, discharging governmental functions; and that the defendant, Saunders, is superintendent of Schools of Newport News and holds office pursuant to the Constitution and laws of Virginia as administrative officer of the public free school system of that state.

The complainants further alleged that the defendants over a long period of years consistently pursued and maintained a policy of paying colored teachers and principals in the public schools of Newport News salaries less than were paid white teachers and principals in the public school system possessing the same professional qualifications, certificates and experience and exercising the same duties and performing the same services as colored teachers and principals. Upon the issue presented by the complaint and answer thereto, evidence was taken, and on January 28, 1943, an or: der was entered holding that the allegations of the complaint were sustained by the evidence in that the defendants discriminated against the plaintiffs and persons similarly situated in the payment of salaries, solely on account of their race and color; that the official policy and acts of the defendants in paying the Negro teachers and principals salaries smaller than were paid the white teachers and principals possessing substantially the same professional qualifications and experience and performing similar duties, in so far as such differentiations were predicated solely on race or color, were unlawful and unconstitutional and in violation of the “equal protection clause” of the Fourteenth Amendment to the Constitution of the United States and of 8 U.S.C.A. §§ 41, 43. By the order the defendants were enjoined and restrained from such discrimination, which injunction by its terms became operative as to contracts and agreements made by the defendants for the school year 1943-44. The cause was retained upon the docket.

On May 4, 1944, a petition was filed in this Court on behalf of plaintiff, Newport News Teachers’ Association, alleging in substance that since the granting of the injunction the defendants have continued to pay colored teachers and employees salaries less than are paid white teachers and employees having similar qualifications and experience and performing similar duties, solely on account of race or color, and praying the issuance of a rule against the defendants to show cause why an attachment in contempt from this Court should not issue.

A rule to show cause was issued on May 4, 1944.

Several hearings upon the rule have been had. Testimony was introduced by both the plaintiffs and the defendants and the case has been argued at some length, from which it appears that the following situation exists:

Prior to the adoption of the salary schedule of May 11, 1943, copy of which appears in the record as Respondent’s Exhibit No. 1, the defendants maintained separate salary scales for white and colored teachers. Petitioner’s “Exhibit A” is the salary schedule for white teachers prior to 1941; petitioner’s “Exhibit B” is the schedule for colored teachers prior to 1941; petitioner’s “Exhibit C” is a schedule adopted in 1941; and petitioner’s “Exhibit D” is the schedule adopted for 1942. The schedules for 1941 and 1942 are not of importance so far as the present issue is concerned.

From an examination of petitioner’s Exhibits A and B, which represent the salary schedules of white and colored teachers, respectively, for a considerable period of time prior to 1941, it is apparent that there was a discrimination based upon race or color. Under those schedules a white teacher holding a normal diploma entered the system at a minimum of $1,000 per an-num, with annual increases of $100 per year over a period of six years until reaching the maximum of $1,600. The white holders of Bachelor’s and Master’s degrees entered at $1,200 and $1,400, respectively, and were increased at the rate of $100 per year over a period of ten years, until reaching the maximum of $2,200 and $2,400, respectively. A colored teacher possessing a normal diploma entered the system at a minimum of $600 and after seven annual increases of $75, reached the maximum of $1,125. The colored holder of a Bachelor’s degree entered at $1,000 and after seven annual increases of $75, reached the maximum of $1,525. No provision for a colored holder of a Master’s degree appears on the schedules.

Subsequent to the issuance of the injunction, the schedule of May 11, 1943 (Respondent’s Exhibit No. 1), was adopted. Upon its face that schedule appears applicable to teachers of both races and the rates of compensation are as follows:

Normal professional $800 minimum, with 15 annual increments until the maximum of $1,600 is reached; the holder of a Bachelor’s degree upon entering receives $1,000 and after 15 years receives $2,200; the. holder of a Master’s degree receives a minimum of $1,200, increased to $2,400 after 15 years. The schedule provides that no teacher’s salary will be decreased.

Upon its adoption the teachers, white and colored, were transferred to the new schedule, being given credit for the amount of time previously employed. Consequently, a white teacher who entered the system without previous experience in 1933 holding a normal professional diploma at the minimum of $1,000, after seven years would receive $1,600, which amount would not be decreased under the current schedule; whereas, a colored teacher holding a normal professional diploma, who entered the system in 1933 at a salary of $600, had reached the maximum under the old schedule of $1,125 after serving eight years.

In 1943 the colored teacher was transferred to the new schedule with credit for ten years’ experience and therefore received under the new schedule $1,350. Accordingly, with no decrease in the salary of the white teacher and annual increases for the colored teacher provided under the new schedule, five years will be required for the colored teacher to reach a salary bracket of $1,600 and be placed on an equal basis with the white teacher.

The discrimination with respect to the holders of Bachelor’s degrees may be illustrated by the following facts: In 1934 Rainey, a colored teacher holding a Bachelor’s degree, entered the system at a salary of $1,000. He was transferred to the current schedule in 1943 at a salary of $1,600. In 1934 a white teacher named Bayless, holding a Bachelor’s degree, entered the system at $1,000 per annum, which was $200 less than the prescribed minimum, and was transferred to the 1943 schedule at $1,900 per annum. Both teachers had completed nine years of service, during which time the colored teacher had reached the maximum of $1,525 under the old schedule but due to the adoption of the new schedule nine years service entitled him to be reclassified at $1,600. The white teacher having completed nine years’ service (although entering the system at $200 less than the minimum set for white teachers) had received annual increases of $100 for nine years and upon the adoption of the new schedule was transferred thereunder at $1,900, which, on the new schedule, was equivalent to twelve annual increases. Consequently the white teacher received an advantage equal to three additional years of service.

To eliminate the discrimination complained of, it would be necessary to place teachers of both races upon an equal salary basis. Therefore, to comply with the terms of the order the white and colored teacher should have been transferred to the new schedule at the same rate of pay, whether greater or less than the previous or present scales. It is apparent that the effect of the adoption of the 1943 schedule is to perpetuate the discrimination which existed prior to the issuance of the injunction in this case, so far as teachers then in the system are concerned.

It is therefore obvious that the School Board in adopting the salary schedule for 1943 has not complied with the terms of the order of the Court which enjoined and restrained the defendants from discriminating in the payment of salaries against the colored teachers and principals and in favor of the white teachers and principals in the public schools, solely on account of race or color, and from paying the colored teachers and principals salaries less than those paid white teachers and principals of substantially the same qualifications and experience and performing similar duties, solely on account of race or color.


author: HULEN, District Judge.

text:
    WASHINGTON UNIVERSITY v. UNITED STATES et al.
    No. 2669.
    District Court, E. D. Missouri, E. D.
    June 21, 1945.
    Richard S. Bull, of St. Louis, Mo., for plaintiff.
    Harry C. Blanton, U. S. Dist. Atty., of Sikeston, Mo., Russell Vandivort, Asst. U. S. Dist. Atty., of St. Louis, Mo., and Paul S. McMahon, Sp. Asst. to the Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen. and Andrew D. Sharpe, Sp. Asst. to the Atty. Gen. on the brief), for the Government.
    Stewart D. Flanagan, of St. Louis, Mo., and James L. Crawford, of Cincinnati, Ohio, for intervening defendants.
   HULEN, District Judge.

The complaint is in two counts. Count One seeks recovery of employers’ tax paid by the plaintiff for the five quarterly periods ending September 30 and December 31, 1940, and March 31, June 30, and September, 30, 1941, under Subchapter B of Chapter IX of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 1500 et seq. (formerly the Carriers’ Taxing Act of 1937). Count Two of the Complaint seeks recovery of sums paid under the same law, representing employees’ taxes, for the same period.

The question presented for decision under the pleadings and record is whether plaintiff, in its operations of Cupples Station, in St. Louis, Missouri, is a common carrier and therefore an employer within the meaning of Subchapter B of Chapter IX, Internal Revenue Code.

Plaintiff is a charitable and educational corporation, organized under special acts of the Legislature of Missouri. As such educational institution it is exempt from liability for employment taxes under Sub-chapter A of Chapter IX of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 1400 et seq. (which does not include employment by carriers). The operations of the plaintiff which constitute the basis of the contention of the parties to this case concern what is known as Cupples Block. Cupples Block, consisting of the equivalent of four or five city blocks, is improved with a number of large industrial and commercial buildings, occupied by tenants of the plaintiff. The property constitutes a part of plaintiff’s endowment. Cupples Station was erected in 1890 to provide centrally located freight station facilities for railroads operating in the St. Louis area. In 1900 the Cupples Block was conveyed to the plaintiff. Prior to August 1, 1935, the Terminal Railroad operated Cup-ples Station. Plaintiff and the Terminal Railroad Association entered into a contract on August 1, 1935, under which Cupples Station was operated during the period involved in this case by plaintiff, The Terminal acted on behalf of certain carriers referred to in the contract. All parties agree that Cupples Station was a public freight station prior to the execution of the contract of August 1, 1935. On execution of the contract, the plaintiff took over the employees of the Terminal Railroad at Cupples Station and, as far as physical operations were concerned, there was no change in the operation of Cupples Station subsequent to the execution of the contract, as compared with its operation prior thereto. The contract of August 1, 1935, provides that the Terminal will pay the plaintiff a rental of $1250 per month, and in addition the sum of 60per ton for handling less than carload freight at Cupples Station.

The Commissioner of Internal Revenue, in a ruling made on the 22d of July, 1940 held that with respect to the operation of Cupples Station, the plaintiff was an employer, liable for employment taxes under Subchapter B of Chapter IX of the Internal Revenue Code, which covers taxes to be paid by carriers with respect to their employees. Plaintiff paid employers’ taxes for five quarterly periods covered by the complaint, and also delivered to the Collector of Internal Revenue the amounts deducted from the compensation of employees, as provided in the Act. Plaintiff filed a claim for refund of employer’s and employees’ taxes on January 19, 1942. The claim was disallowed by the Commissioner on May 11, 1942, and this suit followed.

Certain employees of Cupples Station during its operation by plaintiff, who are also members of the Brotherhood of Railway and Steamship Clerks, Freight Handlers, Express and Station Employees, were permitted to intervene in this case as parties defendant because of their interest in seniority rights and retirement benefits, indirectly involved. Plaintiff now concedes it is not entitled to recovery under Count Two of the complaint, because of its failure to comply with the provisions of the law and regulations of the Secretary of the Treasury with respect to claim for refund of employees’ taxes.

By agreement of the parties, the record in this case includes evidence taken at a hearing on August 26, 1942, before an Examiner of the United States Railroad Retirement Board, together with exhibits introduced at that hearing, the same question being at issue in that suit as is now presented to the Court.

Defendant bases its right to collect the tax in issue on the provisions of the Internal Revenue Code, Section 1532, 26 U. S.C.A. Int.Rev.Code, § 1532 (included in Subchapter B of Chapter IX) and Part I, Section 1(3) (a) of the Interstate Commerce Act, 49 U.S.C.A. § 1(3) (a). Employer is defined in Section 1532, Internal Revenue Code, as follows:

“Definitions
“As used in this subchapter — ■
“(a) Employer. The term ‘employer’ means any carrier (as defined in subsection (h) of this section), and any company which is directly or indirectly owned or controlled by one or more such carriers or under common control therewith, and which operates any equipment or facility or performs any service (except trucking service, casual service, and casual operation of equipment of facilities) in connection with the transportation of passengers or property by railroad, or the receipt, delivery, elevation, transfer in transit, refrigeration or icing, storage, or handling of property transported by railroad, * * * ”
“(h) Carrier. The term ‘carrier’ means an express company, sleeping-car company, or carrier by railroad, subject to part I of the Interstate Commerce Act.”

Section 1 (3) (a) of the Interstate Commerce Act, 49 U.S.C.A. § 1 (3) (a) defines the term “railroad” as follows: “The term ‘railroad’ as used in this part shall include all bridges, car floats, lighters, and ferries used by or operated in connection with any railroad, and also all the road in use by any common carrier operating a railroad, whether owned or operated under a contract, agreement, or lease, and, also all switches, spurs, tracks, terminals, and terminal facilities of every kind used or necessary in the transportation of the persons or property designated herein, including all freight depots, yards, and grounds, used or necessary in the transportation or delivery of any such property. The term ‘transportation’ as used in this part shall include locomotives, cars, and other vehicles, vessels, and all instrumentalities and facilities of shipment or carriage, irrespective of ownership or of any contract, express or implied, for the use thereof, and all services in connection with the receipt, delivery, elevation, and transfer in transit, ventilation, refrigeration or icing, storage, and handling of property transported. The term ‘person’ as used in this part includes an individual, firm, copartnership, corporation, company, association, or joint-stock association; and includes a trustee, receiver, assignee, or personal representative thereof.”

The position of defendant, that plaintiff in its operation of Cupples Station was an employer within the meaning of the above statute, is based on the ruling in the case of Union Stock Yard Co. v. United States, 308 U.S. 213, 60 S.Ct. 193, 196, 84 L.Ed. 198. We quote the following construction of Section 1(3) (a) from that case:

“The statute, it is true, does not purport to say when one who is a railroad carrier because engaged in furnishing railroad terminal facilities and services, is to be deemed a ‘common carrier.’ But that question was put at rest in United States v. Brooklyn Eastern District Terminal, 249 U.S. 296, 39 S.Ct. 283, 63 L.Ed. 613, 6 A.L.R. 527. There a local terminal company rendering terminal services as the agent of numerous rail carriers, was held to be engaged in a public or common calling, and hence to be a common carrier within the meaning of the Hours of Service Act, 34 Stat. 1415, 45 U.S.C.A. § 61 et seq., which is applicable to any common carrier by railroad engaged in interstate commerce. Cf. Southern Pacific Terminal Co. v. Interstate Commerce Comm’n, 219 U.S. 498, 31 S.Ct. 279, 55 L.Ed. 310; United States v. California, 297 U.S. 175, 181, 56 S.Ct. 421, 422, 80 L.Ed. 567; United States v. Sioux City Stock Yards Co., C.C.Iowa, 162 F. 556, 39 S.Ct. 286, 63 L.Ed. 613, 6 A.L.R. 527.
“It is not important, as appellant seems to think, that, as an incident to the service it renders to shippers and to the line-haul carriers, it acts as agent of the latter. The character of the service, in its relation to the public, determines whether the calling is a public one, and a common carrier does not cease to be such merely because in rendering service to the public it acts as the agent of another. United States v. Brooklyn Eastern District Terminal, supra, 249 U.S. 307, 39 S.Ct. 286, 63 L.Ed. 613, 6 A.L.R. 527. Connecting common carriers frequently act in that capacity for each other without losing their status as such.
“Nor is it of weight that the terminal service includes no rail-haul. See Southern Pacific Co. v. Interstate Commerce Comm’n, 219 U.S. 498, 31 S.Ct. 279, 55 L.Ed. 310, or that operation and control of the terminal facilities are wholly separate from those of any railroad. United States v. Brooklyn Eastern District Terminal, supra, 249 U.S. 305, 39 S.Ct. 285, 63 L.Ed. 613, 6 A.L.R. 527. It is enough that the loading and unloading are rail transportation services performed at a railroad terminal as a common or public calling by one who, in rendering it, engages in the transportation of property by railroad within the meaning of the Act.”

Plaintiff concedes in its brief that the facilities and service furnished for loading and unloading less-than-carload freight at Cupples Station, by it, were facilities and service of railroad transportation as defined by the Interstate Commerce Commission. But plaintiff denies that it is a public freight station or that it performs any activities of common carrier “of a public calling.”

Defendant alleges that Cupples Station is a carrier by railroad subject to Part One of the Commerce Act, and points to the fact that the Interstate Commerce Commission on numerous occasions prior to the execution of the contract between the Terminal and the plaintiff, has held Cupples Station to be a "bona fide railroad station,” having “terminal instrumentalities” or “facilities” used in the transportation of property by railroad and in services in connection with the receipt, delivery, transfer, and handling of property transported by railroad. The record supports the claim of defendant that there was no change in the character of the station after plaintiff assumed its operation under the contract of August 1, 1935. The contract refers to the station as “Cupples Station, hereinafter called ‘Station’ and used for the purposes of a freight station in St. Louis, Missouri.” The contract then proceeds to provide that plaintiff “will take over and assume the full operation of said station as an unloading and loading place for less-than-carload freight consigned to or from station by each of the herein designated carriers, as well as for loading and unloading carload freight for shippers and consignees.” The contract nowhere restricts or attempts to restrict the operation of Cupples Station for the benefit and use only of tenants of Cupples Block. On the contrary the contract provides, “The University will furnish and maintain for the benefit of carriers all of the equipment and facilities of the character now used at the station aforesaid, together with * * * forces to perform such functions and clerical services as are usual and customary at a railroad freight station for the handling of, and the University hereby covenants and agrees to handle for the carriers less-than-carload freight delivered by or intended for delivery to, the carriers at the station, and will unload and load carload freight for the shippers and consignees * *

The “common or public” character of Cupples Station as operated by plaintiff is evidenced by the fact that plaintiff is performing a service which the railroads are bound to furnish as a part of their transportation service in the receipt, delivery, loading and unloading of less-than-carload freight, the charge for such service being included in the line haul rate. Plaintiff’s contention that during the period involved in this case no less-than-carload freight was handled for any shipper or consignee other than tenants 'of Cupples Block is not decisive of this question, in our opinion. By the contract of plaintiff with the railroads, it undertook to perform such services at Cupples Station “as are usual and customary at a railroad freight station.” This contract constituted a holding out to the public of services plaintiff undertook and was ready to perform. That only the tenants of Cupples Block, insofar as less-than-carload freight was concerned, availed themselves of the facilities provided for in the contract, could not change the public character of the service. The tenants of the Cupples Block are a part of the shipping public. Further operation of the Station as a common carrier is shown by the application by plaintiff of the rules covered by the agreement between Cupples Station and the Brotherhood of Railway and Steamship Qerks, Freight Handlers, Express and Station Employees, effective February 1, 1922, in dealing with the employees of Cupples Station. Also, plaintiff received Office of Defense Transportation orders applicable only to “public freight stations” and complied with such orders. Mr. Harry Brook-ings Wallace, testifying for the plaintiff, as “Chairman of the Board of the Cupples Company,” stated that the facilities of Cupples Station were, accessible to the public.

Plaintiff attempts to avoid the import of the Union Stockyards Co. case, taking the position, first that “The Interstate Commerce Commission exercises no jurisdiction over the station.” In the Union Stockyard Co. case, a like contention was made without avail. Plaintiff further contends that there was no advertising as a public station, nor was anything done to represent the station as one serving the public. It is our opinion that the contract between the Terminal Company and the plaintiff does represent the station as one ready and able to serve the public.

Plaintiff in its operation of the Cupples Station conducts the enterprise as a separate and identifiable entity. The record presented sustains the defendant’s position in this respect.

It is our conclusion that the plaintiff, during the period in question was an employer, liable for employment taxes under the Carriers’ Taxing Act of 1937, Sub-chapter B of Chapter IX of the- Internal Revenue Code.

       Pertinent parts of the contract are as follows:
      “First: The University being the present owner of the facilities hereinafter set forth, and as outlined in red on the plat, marked Exhibit A, attached hereto and made a part hereof, together with the improvements thereon, which facilities are commonly known' and designated as ‘Cupples Station,’ hereinafter called Station, and used for the purpose of a freight station at St. Louis, Missouri, will take over and assume the full operation of said Station as an unloading and loading place for less-than-carload freight consigned to or from Station by each of the herein designated Carriers, as well as for loading and unloading carload freight for shippers and consignees.
      ******
      “Third: The University will furnish and maintain for the benefit of Carriers all of the equipment and facilities of the character now used at the Station aforesaid, together with railroad tracks, now owned and installed by it, light, heat, power, supplies and other essential appurtenances; also the forces to perform such functions and clerical services as are usual and customary in a railroad freight station for the handling of, and the University hereby covenants and agrees to handle for the Carriers, less than carload freight delivered by, or intended for delivery to, the Carriers at the Station, and will unload and load carload freight for the shippers and consignees on such terms as it may see fit to impose, but without any charge whatever to the Carriers for the loading and unloading of carload freight consigned to or from said Station.
      “Fourth: The Terminal shall act as the impartial financial agent or clearing house for the University and the Carriers, in collecting and paying monies due the University and determined as hereinafter expressed.
      “Fifth: The Terminal, acting as aforesaid, will pay to the University
      “(a) within thirty days from the date hereof, the sum of Fifteen Thousand Dollars ($15,000.00), same being the agreed consideration for the use by Carriers of the aforesaid equipment and facilities for and in the loading and unloading of less-than-carload freight during the period August 1st, 1934, to July 31, 1935, inclusive;
      “(b) for furnishing the equipment and facilities and for loading and unloading less-than-carload freight as set forth in paragraph Third hereof;
      “(b-1) rental for the aforesaid equipment and facilities at the rate of One Thousand Two Hundred and Fifty Dollars ($1250.00) per month; and
      “(b-2) for the service of loading and unloading, during each month of term hereof, of all less-than-carload freight, at the Station, at the rate of sixty and one-half cents ($0.605) per ton of such freight. The said rate shall remain in force and effect for a period of not less than one year from the date hereof, after which it may be changed by mutual agreement of the University and the Terminal, any such mutually agreed change to be determined after a test made by the duly authorized representatives of the University and the Terminal of the cost and expense to the University, per ton, of such freight", of performing such loading and unloading service during a period of one week to be selected by said representatives for such purpose. Whatever rate may be agreed upon shall remain in effect for not less than one year before being changed in the manner hereinabove provided for the determination of such rate.
      ******
      “Seventh: With respect to any Carrier designated herein, University shall be deemed in possession of all less-than-carload freight:
      “(a) If delivered at Station by truck, from time unloaded from delivering truck on the platform of Station^ (a-1) until delivered to consignee in University’s premises in the Station, or (a-2) until tendered Carrier, loaded in freight cars placed at Station platform for such loading and tender, or (a-3) if intended for handling from Station by truck, until tendered by University at a place in Station convenient for loading on truck, to the truckman authorized to remove the same from Station and the delivery to University, by such truckman, of receipt for such freight, on form approved by the Carrier;
      “(b) from time tendered University by any Consignor who shall be a tenant of University in the premises in the Station, (b — 1) until tendered by University to the Carrier entitled thereto, loaded in freight cars placed at Station platform for such loading and tender, or,. (b-2) if such freight be intended for handling from Station by truck, until tendered by University, at a place in Station convenient for loading on truck, to the truckman authorized to remove the same from Station and the delivery to University by such truckman, of receipt for such freight, on form approved by the Carrier;
      “(c) if delivered at Station in freight car; from time the car containing such freight shall be set at Station for unloading until (c — 1) delivered to consignee in University premises containing Station, or (c-2) if intended for handling from Station by truck, until tendered by University, at a place in Station convenient for loading on truck, to the truckman authorized to remove the same from Station and the delivery to University, by such truckman, of a receipt for such freight in form approved by the Carrier.
      “Eighth: The University agrees that it will indemnify and save harmless the Carriers and the Terminal from and against any and all liabilities, judgments, outlays and expenses consequent on (a) any loss of or damage to any and all such freight while in University’s possession and (b) injury to or death of any person caused by any act or omission of the University, its agents, employes, or servants, arising in the course of the performance by the University of the services or duties undertaken hereunder. University agrees that it will provide and keep in force and effect during the life of this agreement, at the cost of the University, such policy or policies of liability insurance as will cover, and be adequate to cover and protect against, any liability of the University to its employes and servants, or their representatives engaged in said service, for personal injury or death.”

       Based on the ruling of the Supreme Court in Union Stock Yards Co. v. United States, 308 U.S. 213, 60 S.Ct. 193, 84 L.Ed. 198, on December 4, 1939.


author: JAMES ALGER FEE, District Judge.

text:
    In re OPPENHEIMER.
    No. 21865
    District Court, D. Oregon.
    Feb. 23, 1945.
    No appearances noted.
   JAMES ALGER FEE, District Judge.

This is a hearing upon a petition for naturalization held in open court. The petitioner is a German of Nordic extraction. She came to this country in 1939. Her examination indicates that she has a good mind, since she passed all the usual tests of knowledge of government and stock questions as to organization and beliefs. Her husband was recently admitted by the court with the writer presiding. The testimony in his case, and the fact that he is a Jew, seemed to guarantee that he had no allegiance to the principles of the Nazi government. The court was not advised of his marriage to a person of German blood. If this had been called to the attention of the court much more scrutiny would have been given to the foundation. For all practical purposes that determination is now irrevocable. This woman would unquestionably have been admitted also if a hearing had not been conducted in open court, since she is recommended by the examiner under direction of the Central Office. Other than the unsupported testimony, there is no proof that applicant abandoned the principles of the government which is now at war with this country. She testified she fled from Germany but did not marry her husband until she got to England. The witnesses have only known her since she has lived in this country.

The law puts the burden of proving attachment to the principles of the Constitution squarely upon the petitioner. Once petitioner is admitted she is protected by the guarantees of the Constitution, while an enemy alien is subject to complete direction by the Executive or Congress. In the meantime neither the examiner nor the court has sufficient knowledge, or information, to intelligently question the applicant.

If it be assumed in this case, as it was in the case of Schwab v. Coleman, 4 Cir., 145 F.2d 672, 673, that “There is no dispute as to the facts or as to their showing without contradiction that the petitioners are persons of good moral character, attached to the principles of the Constitution, and well disposed to the good order and happiness of the United States”, there would of course be no question to be considered. The very statement begs the very question here in issue. These are the very prerequisites to admission set by the statute. But the act places the burden of showing the possession of such qualities upon the petitioner. The certificate of admission should not be granted unless these qualities appears to the satisfaction of the court. The process where the hearing is in open court is a judicial one and the end in view is a judgment.

The public, and especially, the body of citizenry, have an interest in the performance of duty by the court. The court must be able to find affirmatively that the petitioner is attached to the principles of the Federal Constitution. A mistake in this regard is for all practical purposes irremediable. See United States v. Baumgart-ner, 322 U.S. 665, 64 S.Ct. 1240, 88 L.Ed. 1525.

This court entirely repudiates the doctrine given specious recognition by a distinguished tribunal in a cancellation case, that the law does not exact affection for or approval of our system of government, or patriotism, upon naturalization. While it is true that a naturalized person may subsequently depart from such fundamentals without laying ground for cancellation, the quality of loyalty to the principles of the Constitution of the United States is a mental or emotional state which is required as a condition precedent to admission. The applicant must be “well disposed to the good order and happiness of the United States” which is a quality of the heart. The oath taken upon admission requires the citizen to “support and defend the Constitution and laws of the United States of America against all enemies, foreign and domestic” and to “bear true faith and allegiance to the same.” These all may be summarized in the ethical characteristic, loyalty. This attitude of devotion cannot be replaced in the present state of the law by an international eclecticism upon the part of the alien seeking admission.

Moreover, a vital distinction must be drawn between a proceeding for cancellation of a certificate already issued under a judgment, and a proceeding for primary admission. This is made plain by an excellent opinion of Judge Slick where it is said:

“The granting of citizenship in the first instance and cancelling citizenship for fraud are as wide apart as the poles. I am free to admit that if defendant were an applicant for citizenship, the evidence adduced in this case would cause me to hesitate and most likely refuse it or, at least, delay the granting of it until after the end of the war. In such a proceeding any reasonable doubt should be resolved against the applicant. The reverse is true in a proceeding to cancel citizenship once granted. Here defendant is entitled to the benefit of a reasonable doubt.
“This is recognized by the layman as well as the legal profession and a witness in this case unconsciously gave expression to this rule.
* * * * * *
“I agree with witness Johnson. I probably would not grant citizenship to defendant, but I am not satisfied to that degree required by the law to take away from him a right that should, and I hope does, value very highly.”

Again, upon the same point, Judge Black in the Western District of Washington lays down this distinction in an illuminating opinion, United States v. Giese, D.C., 56 F.Supp. 1018, 1023. It is there said:

“The decisions by the appellate courts in such Schneiderman [Schneiderman v. United States, 320 U.S. 118, 63 S.Ct. 1333, 87 L.Ed. 1796], Baumgartner and Berg-mann [Bergmann v. United States, 9 Cir., 144 F.2d 34] cases were not in any sense approval of the things those defendants did or said. Such decisions were instead declarations that American citizenship is so extremely precious that no one having it through naturalization court decree should be later deprived thereof unless the evi-deuce should be so exceedingly strong as to be unequivocal as of the actual time such one took the oath.
“The Supreme Court in such late decisions makes it very clear that when the hearing is held upon an application for citizenship that the District Court is very free to, and should, deny the privilege at the hearing upon far less evidence than would have to be produced to cancel the certificate after it has issued. The Supreme Court says the time of admission is the time for careful scrutiny. It holds that before naturalization citizenship is a privilege which the court can and should withhold until affirmatively satisfied by evidence in petitioner’s behalf. But if such a petitioner be admitted his citizenship becomes a right which the Supreme Court holds cannot be set aside except on extremely strong evidence against a defendant of his state of mind as of the date he was admitted.”

The mere fact that Congress adopted provisions of the Nationality Code, 8 U. S.C.A. § SOI et seq., which permit the naturalization of enemy aliens under certain circumstances, does not indicate any intention to deprive this court of the power “to receive the testimony, to compare it with the law, and to judge on both law and fact.” Spratt v. Spratt, 4 Pet. 393, 7 L.Ed. 897, quoted in United States v. Schwimmer, 279 U.S. 644, 649, 49 S.Ct. 448, 449, 73 L.Ed. 889. It certainly did not destroy the necessity of resting a judgment upon the supposed attachment of the alien applicant to the principles of the Federal Constitution.

Furthermore, since the proceeding ends in a judgment, the process should be judicial. Provisions are incorporated in the present statutes which require ninety days’ notice to be given to the Commissioner and that, upon the objection of the Commissioner to the final hearing, the petition shall be continued from time to time and for so long as the Commissioner may require. This is a plain showing that it was the intention of the Congress that the Commissioner should be fully satisfied before he made his recommendation. This is an additional safeguard, but there is no prohibition in the statute against the court also continuing the cause from time to time until satisfied with the showing. Congress did not, nor did the statute, require that the court should accept without question the impression entertained by the Commissioner that the requirements of the statute had been met. The responsibility for the entry of the judgment is placed upon the shoulders of the court and not upon those of the Commissioner.

The whole German nation of civilians is to be put in tutelage in order to wean them from the doctrines of National Socialism. According to the plans they are to be denied intercourse and news of other countries until the virus is cleansed. This court is asked to accept the unsupported declaration of an unknown individual that although reared in such an atmosphere and of such a race, the virus has been eliminated and that she is actually devoted to the principles of the Constitution of the United States.

It is not to be expected that this court should go through the mummery of granting citizenship upon ex parte showings like a default divorce based on a property settlement. The public interest is involved. The body of the citizenry should not be polluted by admitting to citizenship those who still have ingrained within them the enforced teachings of Naziism. There is much report that the adherents of the Nazi principles are going underground and scattering all over the world. Innumerable cancellation cases show that numbers of Germans entered this country after the last war who adhered to the so-called “blood” philosophy which taught that blood is thicker than citizenship papers, and that one of German blood owed first loyalty to the German Volk regardless of the form of government there and regardless of citizenship. These people obtained the gift of citizenship and thereafter organized into groups which were both un-American and subversive. It is common knowledge that many of these persons were arrested by government agents and spirited out of critical areas without due process of law to meet military necessity. It is inconceivable that this court cannot obey the statute and be fully satisfied of the adherence to the principles of the Federal Constitution by this applicant in order to prevent the train of consequences which might conceivably follow admission.

It may be that the Commissioner has on hand, or can obtain from other agencies, evidence as to the prior life and experiences of this applicant which will be entirely satisfactory and satisfying. As above noted, this court has already admitted certain persons of German nationality when it was deemed that the circumstances were such that further guarantees of loyalty and adherence were not necessary.

Patently, this court is not acting under the spur of hatreds engendered by war, but -simply from an application of the wording of the statute and a cold-blooded appreciation of the consequences of admission to citizenship. It has heretofore been noted that the court is utterly helpless in either examining these petitioners or in attempting to uncover facts on examination. The court does not know what questions to ask and it is perfectly clear that the judge receives but little help from the Commissioner or the examiner. Therefore, the only method that the court has, if the judge be not obliged to rubber-stamp the action of the Commissioner and his recommendations, is to order the case postponed until further evidence can be produced by the petitioner who has the burden.

These views seem to bring the writer into sharp conflict with the opinion of appellate judges for whom the highest respect must be entertained. But after all, the primary responsibility rests upon the judge presiding in a naturalization court not to enter a judgment until he is satisfied that the applicant is possessed of the prerequisites to citizenship.

It is, therefore, ordered that this hearing be postponed until the applicant is in a position to produce further evidence.

       See United States v. Rossler, 2 Cir., 144 F.2d 463, 465.

       8 U.S.C.A. § 707(a) (3).

       8 U.S.C.A. § 735(b).

       United States v. Heymig, D.C., 50 F.Supp. 566, 569.


author: FORD, District Judge.

text:
    JONES v. UNITED STATES et al.
    Civil Action No. 3427.
    District Court, D. Massachusetts.
    June 7, 1945.
    Bernard Beerman, of Boston, Mass., for plaintiff.
    Edmund J. Brandon, U. S. Atty., George F. Garrity, Asst. U. S. Atty., and Nyman H. Kolodny, all of Boston, Mass., for Gwen Koffman, intervener petitioner.
    William L. Berger, of Boston, Mass., for defendant Irving J. Jones.
   FORD, District Judge.

This case comes before this court on the motions of the plaintiff and defendant Jones for a summary judgment of dismissal of the claim filed by Gwen Koffman, intervenor, to part of the proceeds of an insurance policy issued on the life of one George Stanley Jones, deceased soldier, under the National Service Life Insurance Act of 1940, 38 U.S.C.A. §§ 801-818. The government has filed a motion to dismiss and all three motions are based on the same ground, which will appear later. The in-tervenor has filed a motion for a judgment declaring the defendant Jones a trustee of a part of the proceeds of the policy.

The facts are undisputed and are as follows :

On March 12, 1945, the plaintiff brought suit against the United States and Irving J. Jones seeking to secure the payments made and to be made to Irving J. Jones on a policy of insurance for, $10,000 issued September 1, 1943, on the life of George Stanley Jones, a soldier in the United States Army. The policy was issued under the provisions of the National Service Life Insurance Act of 1940 as amended, 38 U.S. C.A. § 801 et seq. George Stanley Jones named his brother Irving J. Jones, one of the defendants, beneficiary. Prior to the issuance of the policy, George wrote a letter to his brother Irving informing him of the policy of insurance, that Irving was named beneficiary, and stating that Irving was to divide the proceeds of the policy in the following manner: (a) $4500 “for you [Irving J. Jones] to help take care of Mother”; (b) $4500 for Gwen Koffman, a friend; and (c) $1000 for Thomas A. Jones, the plaintiff. Thereafter, Irving acknowledged the receipt of the letter and assured George he would carry out the latter’s instructions. Subsequently, George died while in the service of the United States Army, and certain payments of the policy were made to Irving.

Gwen Koffman, who has been allowed to intervene in this suit, seeks to recover from Irving 45 per cent, of the policy proceeds received and to be received by him, contending that since George instructed Irving to pay $4500 of the $10,000 to Gwen Koff-man, a trust of the proceeds was created for the benefit of the latter as soon as it was received by Irving.

It is the plaintiff’s contention that Gwen Koffman is not one of a class eligible as a beneficiary of the insurance taken out as provided in Section 802(g) of the National Service Life Insurance Act of 1940, as amended, and to allow her to establish that the trust exists for her benefit would be circumventing and contrary to the intention of Congress in enacting the National Service Life Insurance Act.

The contention made by the plaintiff is correct. Section 802(g) provides that the insurance taken out under provisions of the Act of 1940 shall be payable “only to a widow, widower, child * * *, parent, brother or sister of the insured.” Admittedly Gwen Koffman is not a member of this class.

The applicable rule is stated in Scott on Trusts, Vol. 1, Sec. 79.1, and is as follows: “If an interest can be transferred only to members of a particular class of persons, a trust of the interest cannot be created in favor of a person not within the class.” See O’Brien v. Massachusetts Catholic Order of Foresters, 220 Mass. 79, 107 N.E. 400 and other cases and notes in op. cit.

The intervenor in support of her argument cites the case of Simpson v. Henry N. Clark Co., 316 Mass. 118, 55 N.E.2d 10, which involves an unenforceable, oral trust of realty which became enforceable with respect to the proceeds — personalty—of a sale of the realty. That case is contra-distinguishable from the instant case where no trust is extant ab initio.

The motions for judgments of dismissal are allowed and the claim of Gwen Koff-man in and to the proceeds of the policy is dismissed without costs. The motion of the intervenor for a declaratory judgment is dismissed.