author: LEDERLE, District Judge.

text:
    EATON MFG. CO. v. SIBLEY et al. (FORD MOTOR CO., Third-Party Defendant).
    No. 3753.
    District Court, E. D. Michigan, S. D.
    June 6, 1945.

      Harness, Dickey & Pierce, of Detroit, Mich., for plaintiff.
    Frank Sibley, of Detroit, Mich., for defendants.
    I. Joseph Farley, of Detroit, Mich., for third party defendant.
   LEDERLE, District Judge.

1. Plaintiff, Eaton Manufacturing Company, hereinafter referred to as Eaton, is an Ohio corporation. Defendants Eugene Sibley and Franklin D. Dougherty, trustee, are citizens of Michigan, and reside in this District. Defendant Sibley Rotary Pump Company is a Michigan corporation and has its principal place of business in this District. These three defendants will hereinafter be referred to as Sibley. Defendant Ford Motor Company, hereinafter referred to as Ford, is a Delaware corporation which transacts business in this District and the acts complained of took place in this District. Defendant Baldwin Rubber Company, named in the counterclaim, was dismissed from the action by consent of all parties.

2. Defendant Eugene Sibley owns United States Letters Patent No. 2,291,354, and defendant Sibley Rotary Pump Company has an exclusive license under that patent to manufacture and sell rotary pumps, except in the manufacture, operation, and salvage of motor boats and ships. Defendant Franklin D. Dougherty has no further interest in this patent. Prior to the filing of the complaint herein, Eaton manufactured and sold to Ford a number of rotary water pumps constructed according to the drawings and description set forth in the complaint and Exhibits 5 to 17 inclusive, all of which were substantially duplicates of physical specimen Exhibit “A” as received in evidence. Sibley notified both Eaton and Ford that these devices infringed the patent in suit and threatened to bring a suit for an injunction and an accounting.

3. Eaton filed its complaint for a declaratory judgment in accordance with Sec. 274d of the Judicial Code, 28 U.S.C.A. § 400, in which it sought a declaration that the Sibley patent was invalid, or, if valid, that the accused device did not infringe the patent. An actual controversy existed between the parties within the meaning of the Declaratory Judgment Act. Defendants Eugene Sibley and Franklin Dougherty joined Ford as a third-party defendant, and attached to their answer a counterclaim, charging infringement of the patent and seeking affirmative relief against Eaton, Ford and Baldwin Rubber Company. Among other matters agreed upon at a Pre-Trial Hearing under Rule 16, Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, Sibley Rotary Pump Company was added as a defendant, adopting all pleadings of the other defendants.

4. The counterclaim also sets forth in detail certain transactions and communications that took place between Eugene Sibley and one of Ford’s employees and it in effect charges that this employee by fraudulent misrepresentation induced Eugene Sibley to disclose to him confidential information with respect to the construction of a pump and that Ford in turn furnished this information to Eaton which Eaton used with knowledge of its confidential nature. The counterclaim alleges that “the acts of the said Baldwin Rubber Company, the plaintiff, and said Ford, constitute a defeat of said Sibley’s and said Sibley Rotary Pump Company’s patent rights, designs and inventions and constitute an appropriation and piracy thereof and a breach of confidence and trust hereinabove set forth.” In order to support this part of the counterclaim, Sibley attempted to establish a factual situation which would bring the case within the ruling of cases similar to Booth v. Stutz Motor Car Co., 7 Cir., 24 F.2d 415, also see 7 Cir., 56 F.2d 962.

5. The testimony with reference to the confidential communications between Eugene Sibley and Ford’s employee is in conflict. After taking into consideration all of the surrounding circumstances, I am forced to find as a fact that Ford employees never received any information from Eugene Sibley in confidence, except the specifications in the patent application that was then pending and that these specifications were kept in confidence so far as Ford’s employees were concerned. There is no evidence that Ford transmitted any of the so-called confidential information to Eaton.

6. Subsequent to the date that the alleged confidential communication was received by the Ford employee, Sibley sold to Ford a pump embodying substantially all of the information that Eugene Sibley claimed that he had communicated to the Ford employee. This pump was sold to Ford by Sibley with the knowledge that it in turn was to be sold to the United States Government for experimental use on a land and water vehicle, commonly known as an amphibian jeep. There is no evidence of any communication between Ford and Eaton with reference to the particular devices involved in this suit until sometime after Sibley had sold this pump to Ford.

7. The patent in suit was issued on July 28, 1942. None of the completed accused devices was sold or delivered to Ford prior to August 9, 1942. If Sibley sustained any damages because of the acts of either Eaton or Ford these damages are fully covered by the infringement charge and cannot be based upon the alleged breach of confidence.

8. Many years prior to the date that Eugene Sibley transmitted the alleged confidential information to Ford, Sibley manufactured and sold to the public pumps substantially the same as the pumps involved in this suit. It is obvious that public information cannot be confidential information.

9. Eugene Sibley filed a patent application on July 9, 1938, in which he disclosed his alleged invention involved herein. He filed another application as a continuation in part of the 1938 application on July 29, 1940. He recognized that he was in a crowded art and in his specifications, stated, “It will be understood that pumps of this type * * * have long been known * * *. On the other hand, the present invention relates particularly to the material employed and may be practiced with various forms of gears.” It is evident that when Sibley first filed his application he recognized the most he could claim was that he had invented a “new and useful improvement” to a well-known machine. After claims were repeatedly rejected by the Patent Office, he filed amended claims in which he abandoned the broad claim “to the material employed” and in order to obtain allowance of the patent in view of the prior art, the claims allowed were restricted and limited to the inclusion of the following specific features: (1) “Said pinion being slightly oversized radially with respect to the rotor and being formed of substantially incompressible material whereby the teeth of the pinion will be imbedded slightly in the compressible material forming the teeth of the rotor;” (2) “Said casing being adjustable in a plane perpendicular to the axis of said rotor and pinion to vary the amount which the teeth of the pinion are imbedded in the compressible material forming the teeth of said rotor;” and (3) “The peripheral surface of said pinion being cut away intermediate to the teeth to form a clearance with the rotor portion cooperating therewith at full intermesh there-between,”

10. The accused devices involved in this suit follow the teachings of the prior art and do not embody any of the features of the patent in suit, which the patentee claimed as novel. These devices do not infringe any of the claims of the patent.

11. Pumps referred to in the specifications of the patent in suit, as pumps “that have long been known,” consist of a combination of a central rotating member or pinion with a plurality of gear teeth constructed of metal, and an internally toothed gear member or rotor also constructed of metal, mounted to rotate freely in a housing or casing upon an axis eccentric to the axis of rotation of the pinion in which the pinion has one less tooth than the rotor. When operating, the rotor teeth pass over the inlet and outlet ports in the casing in which the gears are enclosed, alternately opening and closing both the inlet and the outlet ports. Water or other fluid is forced into the pump by atmospheric pressure and forced out by the operation of the rotor. This type of pump is well illustrated by British Patent No. 9359 issued in 1915 to Lilly, United States Patent to Gollings No. 1,284,650 issued in 1918, United States Patent to Hill No. 1,970,146 issued in 1934, and a pump that was in use many years prior to the date of the alleged invention of the Sibley patent which was known in .the trade as the Gerotor-May pump. Eugene Sibley was a witness in this case and frankly stated that he was familiar with the Gerotor-May pump at the time that he designed the pump of the patent in suit. Both the rotor and the pinion in these prior art devices were made of metal. In the patent in suit, the rotor is made of a compressible or resilient material. By this substitution of material, it is possible to make the pinion slightly oversize radially with respect to the rotor. This is the only inventive concept covered by the first four claims of the patent. Claim 3, which is illustrative of this group of claims, reads as follows: “In a pump of the character described, a cylindrical housing having fluid inlet and outlet ports at an end thereof, an annular, internally toothed rotor formed of resilient, compressible material, a metal cylinder or ring surrounding and secured to said rotor and fitting snugly within said housing, a driving pinion of lesser number of teeth than said rotor meshed internally therein, said pinion being slightly oversize radially with respect to said rotor and being formed of substantially incompressible material whereby the teeth of said pinion will be embedded slightly in the compressible material forming the teeth of said rotor, and means for driving said pinion.”

12. Claims 5, 6, 7, and 8 add the feature af an adjustable casing in a plane perpendicular to the axes of the rotor and pinion in order to make it possible to vary the amount by which the teeth of the pinion are caused to be embedded in the compressible or resilient material of the rotor. Claim 5, which is typical of these claims, reads as follows: “In a pump of the character described, a cylindrical housing having fluid inlet and outlet ports at an end thereof, an annular, internally toothed rotor having an outer smooth cylindrical surface closely fitting within said housing, the outer surface of said rotor being adapted strongly to resist distortion, the internally toothed portion of said rotor being formed of resilient compressible material, a metallic driving pinion of lesser number of teeth than said rotor meshed internally therein, said pinion being slightly oversize radially with respect to said rotor whereby the teeth of said pinion will be embedded slightly in the compressible material forming the teeth of said rotor, and means for driving said pinion, said casing being adjustable in a plane perpendicular to the axes of said rotor and pinion to vary the amount which the teeth of the pinion are embedded in the compressible material forming the teeth of said rotor at one side of said rotor.”

13. Claim 9 further limits the Sibley device to a structure in which a portion of the surface of the teeth of the pinion are cut away to form a greater clearance with the teeth of the rotor. The specifications state, “The form of the teeth employed in this type of gear may be widely varied, and in general it may be stated that it is necessary only for the .teeth to be in constant contact.” The selection of the particular contour of the teeth of the pinion and rotor is merely a “mechanic’s choice” and does not disclose any patentable invention.

14. The only advantage claimed for the oversize pinion is that it would provide a more perfect seal without interfering with the passage of solid matter in .the fluid being pumped because of the resiliency of the rotor. Evidence in this case proves conclusively that it is not necessary to have the rotor oversize to gain all of the advantages claimed for the substitution of the material in the rotor. The device accused in this suit does not have an oversize pinion but is constructed with a running fit like the prior art all metal devices, and the evidence discloses that it performed in exactly the same manner as the patented device so far as seal is concerned. The resilient material of the rotor became distorted sufficiently in operation so as to form a substantially perfect seal. If it is unnecessary to have the teeth of the pump embedded into the rotor it is unnecessary to have the casing adjustable.

15. United States Patent No. 1,926,692, to Tarbox discloses a rotary pump in which one of the gears is made of metal and the other of rubber or elastic material and in that patent the specifications point out the advantages of this combination. In Tarbox the pinion is made of the resilient material and the specifications point out that the two parts may be made oversize in relation to one another substantially as claimed in the patent in suit. United States Patent No. 2,028,407 to Moineau and United States Patent No. 2,-276,355 to Van Ranst likewise point out the advantages of having a combination in which one of the gears is made of resilient material.

16. In view of the prior art established in this case, the alleged improvements of the Sibley patent in suit do not disclose a patentable invention. The slight changes made over the prior art were well within the ordinary skill of those skilled in and familiar with the art to which the patent in suit relates.

Conclusions of Law

1. An actual controversy existed at the time the complaint was filed between Eaton and Sibley arising under the Patent Laws of the United States and .this Court has jurisdiction in accordance with the provisions of the Declaratory Judgment Act. 28 U.S.C.A. § 400; E. Edelman & Co. v. Tiple-A Specialty Co., 7 Cir., 88 F.2d 852; Trico Products Corporation v. Anderson Co., 7 Cir., 147 F.2d 721; Ætna Life Insurance Co. v. Haworth 300 U.S. 227, 57 S.Ct. 461, 81 L.Ed. 617, 108 A.L.R. 1000; Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 61 S.Ct. 510, 85 L.Ed. 826; Altvater v. Freeman, 319 U.S. 359, 63 S.Ct. 1115, 87 L.Ed. 1450.

2. Each of the claims of the patent in suit are combination claims and in the light of file wrapper history and the prior art, must be limited to the specific combination claimed. “A combination is an entirety. If one of its elements is omitted,. the thing claimed disappears. Every part of the combination claimed is conclusively presumed to be material to the combination and no evidence to the contrary is admissible in any case of alleged infringement. * * * The patentee makes all the parts of the combination material when he claims them in combination and not separately. * * * ” Walker on Patents, Deller Edition, Vol. 3, page 1697 et seq. The devices alleged to infringe do not embody the principal elements set forth in the claims in suit, and, hence, there is no infringement. Van Wormer v. Champion Paper & Fibre Co., 6 Cir., 129 F.2d 428; Beegle v. Thompson, 7 Cir., 138 F.2d 875.

3. The fact that the particular accused devices involved in this case did not infringe the patent in suit does not relieve the court of the duty of passing upon the validity of that patent when that question is directly raised by the complaint. Trico Products Corporation v. Anderson Co., supra.

4. The patent statute authorizes the issuance of a patent to any person who invents or discovers any new and useful improvement on a machine but every change made in an existing device does not necessarily establish that a patentable invention is disclosed. Whenever the validity of a patent is challenged it is the duty of the court to determine just what the patentee did that was not in essence done before. All of the elements claimed in the combination in the patent in suit were disclosed in the prior art in substantially the same kind of a combination. At the time the disclosure was made the state of the art was such that the combination disclosed would be obvious to any mechanic skilled in the art. Cleveland Punch & Shear Works Co. v. E. W. Bliss Co., 6 Cir., 145 F.2d 991; Timken-Detroit Axle Co. v. Cleveland Steel Products Corporation, 6 Cir., 148 F.2d 267; Seiberling Rubber Co. v. I. T. S. Co., 6 Cir., 134 F.2d 871. All of the claims of the patent in suit are invalid for want of invention.

5. Where, as here, Sibley has failed to establish by a preponderance of the evidence that either Eaton or Ford made use of any confidential information disclosed by Eugene Sibley, he cannot recover on this theory.

6. A judgment is being entered simultaneously herewith, declaring that the accused devices involved in this suit do not infringe any of the claims of Sibley Patent No. 2,291,354; and that all claims of said Patent are invalid for want of invention; and perpetually enjoining Eugene Sibley & Sibley Rotary Pump Company from prosecuting or threatening to prosecute any action charging infringement of Sibley Patent No. 2,291,354 against plaintiff Eaton Manufacturing Company, its agents, vendees, or others in privity with it; and dismissing the counterclaim, with costs to be taxed in favor of Eaton and Ford.


source: Caselaw Access Project

author: GOODMAN, District Judge.

license: Public Domain

text:
    J. E. HADDOCK, Limited, et al. v. PILLSBURY, Deputy Commissioner, et al.
    No. 23542-G.
    District Court, N. D. California, S. D.
    March 15, 1945.
    Godfrey Nordmark and McComb & Nordmark, all of Denver, Colo., and Frank J. Creede and Keith & Creede, all of San Francisco, Cal., for complainants.
    Frank J. Hennessy, U. S. Atty., of San Francisco, Cal., for Warren H. Pillsbury, Deputy Commissioner.
   GOODMAN, District Judge.

The defendant Deputy Commissioner’s decision awarding compensation to the widow of a deceased employee rests upon his finding that the widow was, at the time of decedent’s death, living apart from him “for justifiable cause and by reason of his desertion at such time.” 33 U.S.C. A. §§ 902(16), 909(b).

Upon review, the court should not disturb the Commissioner’s finding and decision, if supported by substantial evidence. Crowell v. Benson, 285 U.S. 22, 46, 47, 52 S.Ct. 285, 76 L.Ed. 598; Voehl v. Indemnity Ins. Co., 288 U.S. 162, 166, 53 S.Ct. 380, 77 L.Ed. 676, 87 A.L.R. 245; Parker v. Motor Boat Sales, 314 U.S. 244, 246, 62 S.Ct. 221, 86 L.Ed. 184.

The finding above referred to was supported by substantial evidence, provided it was not precluded by a decree of divorce awarded the deceased employee on the ground of the widow’s cruelty, but not yet final at the time of the employee’s death.

I am of the opinion that, absent a. final decree of divorce, or a decree final by lapse of time, the Commissioner could explore the facts and himself determine, in the compensation proceeding, whether the widow was, at the time of decedent’s death, living apart from him “for justifiable cause or by reason of his desertion at such time.”

This he did. The evidence he heard supports his finding and it should not be disturbed on review.

The order of the Compensation Commissioner is sustained and the complaint is dismissed.

       As to the distinction between interlocutory and final decrees and the eonclusiveness of such adjudications, see the following: L. E. Waterman Co. v. Modern Pen Co., D.C.N.Y.1912, 193 F. 242, modified on other grounds, 2 Cir., 197 F. 534, affirmed 235 U.S. 88, 35 S.Ct. 91, 59 L.Ed. 142; Ryerson & Son, Inc. v. Bullard Machine Tool Co., 2 Cir., 1935, 79 F.2d 192, certiorari denied 296 U.S. 648, 56 S.Ct. 308, 80 L.Ed. 461; Dusing v. Nelson, 7 Colo. 184, 2 P. 922, 923; Glenn v. Brush, 3 Colo. 26; Baker v. Eilers Music Co., 175 Cal. 652, 654, 655, 166 P. 1006; Webb v. Buckelew, 82 N.Y. 555, 560.


author: YANKWICH, District Judge.

text:
    UNITED STATES v. STANDARD OIL CO. OF CALIFORNIA et al.
    Civil Action No. 4204-Y.
    District Court, S. D. California, Central Division.
    May 18, 1945.

      Charles H. Carr, U. S. Atty., and Ronald Walker and Cameron L. Lillie, Asst. U. S. Attys., all of Los Angeles, Cal., for plaintiff.
    Jennings & Belcher by Frank B. Belcher, all of Los Angeles, Cal., for defendants.
   YANKWICH, District Judge.

At six-thirty A. M. on the 7th day of February, 1944, John Etzel, an enlisted man in the Armed Forces of the United States Government, was crossing Figueroa Street in the City of Los Angeles, on the south side of Eighth Street. Before stepping down from the curb to the pavement, he looked north and saw a semi-trailer oil truck, belonging to the defendant Standard Oil Company of California, and then driven by one of its employees, the co-defendant Ira Boone. The truck was at a distance of some seventy-five feet from the intersection. It was early in the morning and still dark. The automatic traffic signals were not operating. Etzel stepped into the street and crossed easterly, at all times remaining within the confines of the marked pedestrian zone.

Figueroa Street is fifty-six feet wide at that intersection. At a distance of about twenty-four feet from the curb, Etzel was hit by the truck. It is not clear what portion of the truck hit him. But from the fact that he had a large gash on the side of his head, the inference is justified that he came in contact with the right side of the truck, and that the head injury was caused by the handle of the door. He was thrown to the ground. In addition to the injury to his head, Etzel suffered injuries to his face and left thigh and had contusions, lacerations and abrasions over his entire body. He was hospitalized and was unable to perform his tasks as a soldier for twenty-nine days.

By this action, the Government seeks to recover the sum of $192.56. Of this sum, $123.25 is the cost of Etzel’s hospitalization. As to this amount, there is a stipulation that it is the fair and reasonable value of the hospital care necessarily required for Etzel as a result of the injuries suffered. While the stipulation does not concede the necessity for the hospitalization, this fact flows from the obligation of the Government to care for persons in the military service, both under Congressional enactments and Army regulations. The sum of $69.31 represents the wages paid to Etzel while he was incapacitated. There is no stipulation as to, or proof of, the reasonableness of the amount so paid. But, as the pay of enlisted men is fixed by Section 9 of the Pay Readjustment Act of June 16, 1942, it must be assumed that the wages decreed by the Congress are reasonable.

And disability does not relieve the Government of the obligation to pay the wages prescribed.

We have to determine whether the Government is entitled to recover.

The defendants have challenged this right upon several grounds.

First, we must answer the question whether the Government of the United States has the right to sue for the cost of hospitalization of, and wages paid to, a soldier during the time he was incapacitated, through the tortious act of another. There are no precedents controlling. Strange as it may seem, the question has not arisen in peace time or during any of the wars in which large numbers of men were in the active service of the Armed Forces of the United States. There are state court decisions dealing with the status of persons enlisted in the state militia. They do not help. They concerned attempts of persons injured while in the militia to recover under State Workmen’s Compensation Acts. The rulings are both ways. Some cases deny the right to recover upon the ground that a person while an active member of a state militia is not an employee. Other cases,, decide the contrary. Neither group is very persuasive on the question before us.

Workmen’s compensation is based upon a theory which places responsibility for injuries upon industry regardless of fault. When applying this doctrine, the inclusion of any person within the beneficiary groups reflects largely the approach of the court to the problem and the range of its interpretation of a specific enactment. A narrow approach restricts the group, while a broad one, having in view the beneficial social aims to be achieved, enlarges it. However, we are not without signposts to guide us in determining the question. And we can do so without adopting the strict theory of master and servant which the Government asserts. For, ultimately, we are confronted with the fact that courts now take a less circumscribed view of the relation than they did in the past. The trend is to hold that almost any association in which a person is subject to the control of another may be considered as a master-servant relation. Courts apply to it, especially when dealing with the harm which third persons may do to it, the rules of liability which would flow from a strict relation of master and servant. At the common law, the master could recover for loss of services resulting from a tort committed on the servant of a third person. By analogy, a parent was given the right to recover for loss of the services of his child, and a husband for those of his wife. And these actions are entirely independent of the right of the servant, child, or wife to recover for the injuries themselves.

When a man becomes a soldier, a status is created whether the soldier enlists voluntarily or is selected under a Selective Service law. A voluntary enlistment originates in a contract for a definite period. But there any similarity between it and other contractual relationships, such as master and servant, ceases. The essence of the relation of master and servant is the freedom of the servant to end it, subject, of course, to responsibility for wrongful termination. But even a volunteer cannot withdraw from the army during the period of enlistment. Wrongful ending or even long, unexcused absence, is punishable as a crime both in peace and in war time. The obligations which the Government assumes towards a soldier are more legislative than contractual. The Congress of the United States, in the exercise of its war powers, has either defined those obligations or allowed the army establishment to decree them pursuant to a defined congressional policy. In time of emergency, or war, the distinction between the volunteer and the draftee disappears. The aim of the Congress has been to apply all the rules ordained for the comparatively small army maintained in time of peace to the large citizens’ army called up by the Selective Service and Training Act of 1940 and its later amendments. So the upshot of the matter is this: A special relation has been created. Whether we call it a status, as some of the older cases do, or whether we just call it Government and soldier relation, it is clear that both the soldier and the Government have certain rights and obligations arising from it and that a third party who, through his tortious act, interferes with it to the detriment of the Government, is responsible for the mischief he causes. And he cannot avoid responsibility for his act by claiming that the relation is one for which the common law did not have a name. The relation is an actuality. And in the light of the modern trend to protect individuals and categories from outside tortious or even non-tortious interference, thp Government, which, through the negligent act of a third party, is put to the expense of hospitalizing a soldier and loses his services during a period for which it is compelled to pay him his wages, has a claim cognizable in this court.

An English case which arose during the last war sustains these views. The English Crown sought to recover for medical expenses, hospital treatment and wages of two air craftsmen of the Royal Air Force, who had been injured in a collision. The Crown’s right to recover was sustained in these words:

“As regards the claim in respect of wages, it is essentially a claim based upon the old common law principle that a master who has, by the tortious act of a third person, been deprived of the services of his servant may claim damages in respect of that deprivation against the third person who has brought it about. There is not, I think, any doubt that a right of action by a master for the loss of the services of his servant exists and has been recognized from early times. Curiously enough it has perhaps been kept in activity most frequently as the fictitious basis, and the only basis, for the action of seduction by which the seducer of a woman or girl may be made to pay the penalty of his wrongdoing. The Solicitor General referred me to several. cases based upon that principle, beginning with Hall v. Hollander, [4 B & C 660] in 1825, and perhaps most noticeably exemplified in Evans v. Walton [L. R. 2 C.P. 615], It is well settled that when by the tort of a third party a master has lost the services of his servant he can recover damages in respect of that loss of service. The amount of his damages is, of course, dependent upon the facts of the particular case. If he has got a substitute to do the work of the servant, his damages may be the extra cost to which he has been put over and above the payment he makes to the servant who is incapacitated. If he has put an end temporarily to the contract of service of the injured servant and pays him nothing, his damages would be the amount, if any, that he has to pay to the substitute. The payment, if any, that he makes to the substitute may of course be equal to, more than or less than the wage of the injured servant. On the other hand, where he does not employ a substitute, if he continues to pay the wages to the injured servant, he clearly loses any benefit arising from that payment, because he is getting nothing in return for it. In that case, therefore, his damages are, prima facie, the amount of the wages that he has thus paid for nothing. This case is of that last mentioned class,- and the damages claimed on behalf of His Majesty are the amount of the tvages paid to these men during their incapacity. There is no evidence to show that while these men were in fact being paid during their incapacity any extra men were recruited to take their place, or that any payment was made to any other person for doing their work. Therefore, prima facie, damage has been suffered to the extent of the wages thus paid to them for nothing. So much for the claim in respect of wages.

“As regards medical expenses and hospital treatment, the claim for damages for these expenses is even more simple. It is put upon the ground that the Crown, having in fact expended the amount claimed under this head, ought to be compensated fot these expenses by the person responsible for the negligence which rendered them necessary.

“That being the claim which His Majesty would prima facie be entitled to make, the suggested answer is that it is simply a claim by a master for damages for loss of his servant’s services and incidental expenses, and that it must be treated and decided on the common law principles applicable to that relationship.” (Emphasis added)

It is apparent that the case was decided upon the assumption that the rules of master and servant apply. However, as already indicated, the conclusion must be the same, even if we take into account the dissimilarity between the Government and soldier inter-relation and that between master and servant. For, after making due allowance for the differences, we still have a cohesive pact which, like the pactum subjectionis — the pact between king and subject in mediaeval Europe — ties the soldier to the Government, at the same time reserving to each rights and obligations which flow from their union. Or we might apply to it the word which French jurists have coiné i to characterize certain solidarities which lie at the basis of social action— institution. Such institution gives rise to droit institutionnel, a body of rights arising from the communality of the group, such as the family, in which each member exercises certain rights and has obligations not as an individual, but as a member of the institution, according to the position he occupies — suam cuique dignitatem. These rights or obligations stem, not from the members as individuals (in the case of the family, parents or children), but from the basic fact which brought it into being, (in the case of the family, marriage).

So, if we bear in mind the wise saying of a French jurist that there is a greater logic than the logic of concepts — the logic of life and of reality — the conclusion is inescapable that the foundational fact of enlistment, whether voluntary or forced, is the bond (vinculum) which brings into being the Government and soldier institution. To the institution so born, and to the Government and soldier, as members of it, certain rights attach. And the most fundamental one is that others shall not, by their •wrongful action, interfere with it to the harm of the Government.

Rightly. For the Government, after the institution comes into being, assumes a primacy and control over the actions of the other member, the soldier, which is greater than that of the master, husband or father. Hence, whether we approach the problem with the common law norms in view or on the more latitudinarian basis of social actualities, we are compelled to sustain the Government’s right to institute this action. Granted the right to sue, recovery is still dependent on proof of the negligence of the driver, and the absence of contributory negligence on the part of the soldier. It is almost beyond dispute that the driver of the truck was negligent. He testified to seeing Etzel inside the cross walk. He failed to yield to him the right of way, in violation of the California Vehicle Code. This was an act of negligence on the part of an employee for which the employer, Standard Oil Company of California, is liable. The driver pleaded guilty to violation of the Vehicle Code and was fined in the Municipal Court of Los Angeles. This plea was admitted into evidence against him only. As an admission of negligence, after the event, it was not binding on the employer. At the oral argument, I pressed the question whether Etzel was guilty of contributory negligence. A review of the facts in the light of the law of California, which governs, leads me to the conclusion that there was no contributory negligence.

The contributory negligence which bars recovery must be a cooperating cause. It appears from Etzel’s testimony and that of a disinterested witness who was standing on the curb, that Etzel looked north before stepping into the cross walk. He saw the truck at a distance which made it certain that the driver of the truck would see him and yield to his superior right to cross in a marked cross walk. Had the driver taken ordinary precautions, the distance was sufficient to have allowed Etzel to pass unharmed. The driver testified that he saw Etzel; that, at the time, Etzel was not looking in his direction, but that he thought he would look up in time to see the truck coming. He did not stop his truck or swerve it from its path until it was actually upon Etzel.. Having once looked in the direction from which danger was coming and ascertained the position of the truck, Etzel was not bound to continue looking to the north and to the south. Even if he had miscalculated the distance, he could not be charged with contributory negligence. And the fact that he may have looked in the opposite direction before reaching the center of Figueroa Street, in order to see if automobiles were approaching from that direction, if it zvas a fault, was not a negligent act cooperating or contributing to the injury. As said by the Supreme Court of California:

“Respondent testified that before she attempted to cross the street she looked to her left and saw the truck at a distance of approximately 125 feet away, and she calculated she could cross to the street car in safety. We think she had a right to assume that an observance of laws and a reasonable regard for the safety of others on the part of the driver of the truck would not require that she should keep a constmit eye upon him under the circumstances of the case. He could have seen her hurrying for the car, as did others, and it was his primary duty to have done so.” (Emphasis added)

The tnith is, as the driver admitted, he gambled on the chance that Etzel would stop in the cross walk, allow him to pass and yield the right of way to him. But he had no right to expect that, because the law required him to yield. So we have the not uncommon case of a driver taking the risk of missing a pedestrian, and, unfortunately, not missing.

One more contention remains to be dealt with. On March 16, 1944, Etzel settled his claim against the two defendants for the sum of $300.00. He executed a “release in full” which stated, among other things, “I hereby release and discharge Standard Oil Company of California and Ira Boone of and from any and all claims and demands which I now have or may hereafter have,” on account of the accident. It is argued that this settlement precludes recovery by the Government. We do not agree. It is true that a single claim for personal injuries cannot be split, and that a release operates as a satisfaction of whatever claims could have been asserted. But these limitations apply only to the claims which the person executing the release has. They do not apply to a claim arising from the same accident which another person may have, independent of the injured person, because of his relationship to him. The cases already cited make it clear that in a case of this character, the two causes of action co-exist and are independent of each other. And as Etzel incurred no loss through hospitalization, and the wages for the period had to be, and actually were, paid to him by the Government, the settlement of his claim was limited to compensation to him for his suffering, consequent upon his physical injuries.

Judgment will, therefore, be for the plaintiff.

       54 Stat. 885, 50 U.S.C.A.Appendix, § 303(d); Army Regulation 40-505, See. 2.

       54 Stat. 886, 50 U.S.C.A.Appendix, § 303(d). And see: 55 Stat. 800, 10 U.S.C. A. § 2; 56 Stat. 363, 37 U.S.C.A. § 109.

       Hayes v. Illinois Terminal Transportation Co., 1936, 363 Ill. 397, 2 N.E.2d 309; Goldstein v. State, 1938, 281 N.Y. 396, 24 N.E.2d 97, 129 A.L.R. 905; Lind v. Nebraska National Guard, 1944, 144 Neb. 122, 12 N.W.2d 652, 150 A.L.R. 1449.

       State v. Industrial Commission, 1925, 186 Wis. 1, 202 N.W. 191; Baker v. State, 1931, 200 N.C. 232, 156 S.E. 917, 919; Globe Indemnity Co. v. Forrest, 1935, 165 Va. 267, 182 S.E. 215; Andrews v. State, 1939, 53 Ariz. 475, 90 P.2d 995.

       See my opinions in Didier v. Crescent Wharf & Warehouse Co., 1936, D.C.Cal., 15 F.Supp. 91, 93-94; Trudenich v. Marshall, 1940, D.C.Wash., 34 F.Supp. 486, 487.

       Darmour Productions Corporation v. Herbert M. Baruch Corporation, 1933, 135 Cal.App. 351, 27 P.2d 664.

       18 R.C.L. 542; Holdsworth, History English Law, 1922, 3rd Ed. Vol. 8, p. 429; Adm. Commissioners v. S. S. Amerika, (1917) A.C. 38, 44-49 (per Lord Parker), 53-54 (per Lord Sumner); Attorney General v. Valle-Jones, (1935) 2 K.B. 209.

       Restatement of Torts, Sec. 703; 20 Il.C.L. 614-616.

       Restatement of Torts, Sec. 693 ; 41 C. J.S., Husband and Wife, § 401; Lansburgh & Bro. Inc. v. Clark, 1942, 75 U.S.App.D.C. 339, 127 F.2d 331.

       20 R.C.L. 615, 616; Lansburgh & Bro., Inc. v. Clark, 1942, 75 U.S.App.D.C. 339, 127 F.2d 331. And see cases cited in Footnotes 7, 8, and 9.

       6 C.J.S., Army and Navy, § 21; In re Grimley, 1890, 137 U.S. 147, 11 S.Ct. 54, 34 L.Ed. 636: In re Morrissey, 1890, 137 U.S. 157, 11 S.Ct. 57, 34 L.Ed. 644; Selective Draft Law Cases (Arver v. United States), 1917, 245 U.S. 366, 38 S.Ct. 159, 62 L.Ed. 349, L.R.A.1918C, 361, Ann.Cas.1918B, 856; United States v. Williams, 1937, 302 U.S. 46, 58 S.Ct. 81, 82 L.Ed. 39; Falbo v. United States, 1944, 320 U.S. 549, 64 S.Ct. 346, 88 L.Ed. 305; Billings v. Truesdell, 1944, 321 U.S. 542, 64 S.Ct. 737, 88 L.Ed. 917; Local Draft Board No. 1 v. Connors, 1941, 9 Cir., 124 F.2d 388.

       See sections 1530 and 1533, 10 U.S. C.A. Articles 58 and 61 of Articles of War of the Armies of the United States.

       50 ‘U.S.C.A.Appendix, § 301 et seq.

       Restatement of Torts, Sees. 766-767; Original Ballet Russe v. Ballet Russe, 1943, 2 Cir., 133 F.2d 187.

       Attorney General v. Valle-Jones, (1935) 2 K.B. 216, 217.

       Georges Renard: La Valeur de la Loi, 1928, pp. 244-248; Maurice Hauriou: 1927, p. 206; Francois Gény: Science et technique en droit positif privé, 1924, IV, pp. 119-125, 153. And see: Charles Grove Haines, Revival of Natural Law Concepts, 1930; Leon R. Yankwieh, Back to St. Thomas, 1930, II Opinion No. IV, p. 6.

       Emile Boutroux, La Conscience individuelle et la lox, Révue methaphysique et de morale, 1906, p. 14.

       This case illustrates the difficulty which we encounter when we try to squeeze social activities into specific legalistic rubrics such as status, contract, quasi-contract, and the like. Even Sir Henry Maine’s famous apothegm, “The movement of the progessive societies has hitherto been a movement from Status to Contract” (Sir Henry Maine, Ancient Law, Pollock Ed., 1930, p. 182), is no longer accepted by legal scholars as the true index of social progress or progress in law. See: Wm. Seagle, The Quest of Law, 1941, p. 252-265.
      Sorokin has pointed out that while there have always been certain fundamental types of social relationships or systems of inter-action, they have not remained the same, but have undergone many changes. He, himself, after naming three types— familistic, contractual and compulsory— teaches that in the unfoldment of Western culture, institutions may partake of all three with emphasis now on one and then on another. Pitirim Sorokin, Social and Cultural Dynamics, 1937, Vol. 3, pp. 23-43.
      It is, therefore, unrealistic to shut our eyes to actualities merely because they do not fit into accepted legal concepts.

       California Vehicle Code, § 560(a), St. 1935, p. 188.

       California Vehicle Code, § 402(a), St. 1937, p. 2353.

       Restatement of Torts, Secs. 463-465; Rush v. Lagomarsino, 1925, 196 Cal. 308, 314, 237 P. 1066; Soares v. Barson, 1936, 12 Cal.App.2d 582, 585, 586, 55 P.2d 1283.

       McQuigg v. Childs, 1931, 213 Cal. 661, 664, 3 P.2d 309, 310. And see: Burgesser v. Bullock’s, 1923, 190 Cal. 673, 214 P. 649; White v. Davis, 1930, 103 Cal.App. 531, 541-543, 284 P. 1086; Maggart v. Bell, 1931, 116 Cal.App. 306, 310, 311, 2 P.2d 516; Lincoln v. Williams, 1932, 119 Cal.App. 498, 502, 6 P.2d 563; Pinello v. Taylor, 1933, 128 Cal.App. 508, 513; 17 P.2d 1039; Salomon v. Meyer, 1934, 1 Cal.2d 11, 15, 16, 32 P.2d 631; Nicholas v. Leslie, 1935, 7 Cal.App.2d 590, 595, 596, 46 P.2d 761; Lowell v. Harris, 1937, 24 Cal.App.2d 70, 84, 74 P.2d 551; Vanderpool v. Dunham, 1939, 35 Cal.App.2d 166, 94 P.2d 1023.

       Kidd v. Hillman, 1936, 14 Cal.App.2d 507, 58 P.2d 662; Franklin v. Franklin, 1945, 67 Cal.App.2d —, 155 P.2d 637.

       gee cases cited under Footnotes 7, 8 and 9; 41 C.J.S., Husband and Wife, § 401, p. 896. And see: Lansburgh & Bro., Inc. v. Clark, 1944, 75 U.S.App.D.C. 339, 127 F.2d 331, 332, where Groner, C. J., says: “In the prosecution of these separ rate and independent rights there is no privity, and a judgment against one is not a bar to an action by the other.” (Emphasis added)

       The identical contention was rejected in Attorney General v. Valle-Jones, (1935) 2 K.B. 209, 215. The Court said:
      “As the result of that negligence, the injured men had a claim against the defendant for damages, which in the ordinary ease would include any loss of wages during their incapacity and also the cost of any hospital treatment and medical attendance reasonably incurred. The injured men did make a claim against the defendant in which they recovered damages, but those damages cannot have included any sum in respect of loss of earnings, because in fact during the period of their incapacity they continued to receive their pay from their employers, the Royal Air Force; nor did those damages include any expenses of hospital treatment or medical attendance, because these benefits were provided for the men by the Royal Air Force.”


author: BRENNAN, District Judge.

text:
    SCHONGALLA v. HICKEY, U. S. Collector of Internal Revenue.
    Civ. No. 983.
    District Court, N. D. New York.
    July 31, 1943.
    On Reargument March 20, 1944.
    Edward A. Alexander, of New York City (John A. Klett, of New York City, of counsel), for plaintiff.
    Ralph L. Emmons, U. S. Atty., of Syracuse, N. Y., Samuel 0. Clark, Jr., Asst. Atty. Gen., and Andrew D. Sharpe and Leon F. Cooper, Sp. Assts. to Atty. Gen., for defendant.
   BRENNAN, District Judge.

This is an action to recover the sum of $15,594.46, which represents a part of the federal estate taxes levied by reason of the inclusion in the gross estate of the decedent the proceeds of four life insurance policies.

The facts have been stipulated by the attorneys for the respective parties, and the decision rests upon the law applicable thereto.

William Schongalla died on January 12, 1938, at the age of about sixty-four years, leaving him surviving his widow, Anna, his two sons, William Schongalla, Jr., then about nineteen years of age, and Edward Schongalla, then about eighteen years of age. He was also survived by his mother, Minna Schongalla, then about eighty-five years of age.

In addition to life insurance policies aggregating more than $40,000, payable to beneficiaries other than his estate, there was in force at the time of decedent’s death four life insurance policies upon his life, the proceeds of which were included in the gross estate of the decedent. An estate tax was levied over the protest of the executor for the recovery of which this action is brought.

Two of the four policies were issued by the Union Central Life Insurance Company on May 20, 1924, in the face amount of $30,000 each. These policies were identical in terms, except that William Schongalla, Jr., son of the decedent, was named as beneficiary in one, and Edward Schongalla another son, was named as beneficiary in the other.

These two policies were of the endowment type. Each provided upon the face thereof that upon the maturity date; to-wit: the 12th day of July, 1959, or, if the insured died prior to such maturity date, then the proceeds of the policy should be paid to the beneficiary, or to the executors, administrators or assigns of such beneficiary. Each policy expressly states upon its face that it is without privilege of change of beneficiary.

It was further provided in agreements attached thereto, signed by the decedent, that in the event of the death of the insured before the policies matured as endowments, then the proceeds should be retained by the insurance company; interest upon the principal sums should be paid in monthly installments to the named beneficiary until he reached the age of twenty-four years, when one-third of the principal sum should be paid to him; an additional one-third should be paid when he attained the age of thirty years, and the final one-third when he attained the age of thirty-five years; interest upon the retained balance to be paid monthly. It was also provided an the agreements “in the event I survive my said son, said net sum shall be paid my executors, administrators or assigns”.

The other two policies were issued by the Metropolitan Life Insurance Company. One of them, dated October 20, 1903, was in the principal sum of $3,000, the beneficiary therein being the decedent’s mother, Minna Schongalla, “if living, otherwise to the legal representatives of the insured”. It appears to be conceded that the words “* * * no change of beneficiary” were endorsed thereon.

The other policy, dated October 10, 1892, was payable upon the death of the insured to “either the executor or administrator, husband or wife, or any relative by blood or lawful beneficiary of the insured”. The proceeds of this particular policy at the time of decedent’s death amounted to $112.-19 and was paid to Minna Schongalla.

The Government contends that the proceeds of all four of the policies are taxable under the provisions of Section 302(c) of the Revenue Act of 1926 as amended, 26 U.S.C.A.Int.Rev.Code, § 811(c), by reason of the fact that the decedent retained or was possessed of an interest in each of the policies, since the proceeds of each of said policies would be received by him should he survive the respective beneficiaries.

Further, the Government contends that said proceeds are taxable under the provisions of Subdivision g, since the same constituted an excess of $40,000 receivable by beneficiaries other than the executor as insurance under policies taken out by the decedent upon his own life, since the deceased retained an interest therein which was terminable only at his death.

The plaintiff contends that the decedent possessed no incidents of ownership or interests in the policies either prior to or at the time of his death, and, therefore, there could be in his estate no taxable interest within the meaning and scope of either subdivisions of the Revenue Act.

The case has been exhaustingly briefed by the attorneys for both parties upon the theory that the decision involved only the determination of the question as to inclusion in the gross estate of the decedent the proceeds of insurance policies, each payable to a named beneficiary if he should survive the decedent; otherwise to his estate or assigns.

The question is referred to but not decided in Broderick v. Keefe, 1 Cir., 112 F.2d 293, and, as in that case, an examination of the policies themselves should be made in order to determine the interests, if any, of the decedent therein.

On May 9, 1924, the A. R. Hueuser Co., Inc., of which the decedent was president, sole stockholder and a director, applied to the Union Central Life Insurance Company for the issuance of insurance upon the life of decedent in the total amount of $200,000. Two policies were issued in the amounts of $80,000 and $40,000, to be payable to Anna Schongalla, wife of the decedent, as beneficiary; a policy in the amount of $20,000 to be payable to Minna Schongalla, mother of decedent, as beneficiary; a policy in the amount of $30,000 to be payable to Edward R. Schongalla, a son, as beneficiary, and a policy in the amount of $30,000 to be payable to William Schongalla, Jr., a son, as beneficiary.

The application was signed by the corporation, by the decedent as president.

The question of inclusion of the proceeds of the last two mentioned policies in the gross estate of the decedent is to be determined in this action.

The policies purport to be signed by the insurance company at the City of Cincinnati, Ohio, on May 20, 1924, and the stipulated facts and briefs assume that that date was the effective date thereof.

The policies provided in Paragraphs 34, 35, 36 and 37 that the owner of the policy by written notice to the company at its home office may elect to have the sum payable under each policy payable in one of three ways, which are described as “Option 1”, in Paragraph 35; “Option 2” in Paragraph 36 and “Option 3” in Paragraph 37. The insurance company agreed to furnish a form of the written notice above referred to upon request.

On May 20, 1924, the date of the issuance of the policies, the decedent, as the insured, indicated on a form furnished by the insurance company a notice of change of beneficiary, and election of settlement option in the event of the death of the insured. This agreement is attached to and became part of each policy, and it is in this agreement that the words “In the event I survive my said sons, said net sum shall be paid to the executors, administrators or assigns” appear, and a further limitation is provided therein to the effect that the benefits accruing to any beneficiary thereunder shall not be transferable, or subject to commutation or incumbrance, or to legal process.

Paragraph 33 of the policies provides that none of the terms thereof shall be modified, save by an agreement in writing, signed by certain officers of the insurance company. The agreements indicate that they were accepted by the insurance company at its home office in Cincinnati, Ohio, on the 8th day of September, 1924, and they bear at least the signature of one of the officers provided for in Paragraph 33.

An examination of the Metropolitan Life Insurance Company policy, dated October 20, 1903, discloses that after the premiums thereon had been paid for three or more years, the company will grant, as the insured or assured may elect, one of the following options: (a) a loan; (b) the cash surrender value; (c) a paid-up policy.

The second Metropolitan Life Insurance Company policy, dated October 10, 1892, was of the so-called “industrial” type. No named beneficiary was designated therein. It provided for a weekly premium payment, and contains a so-called “facility of payment” clause permitting payment by the company of the proceeds of the policy to either the executor or administrator, husband or wife, or any relative by blood or lawful beneficiary of the insured.

In addition, this policy provides that after it had been in force five years, and after the insured shall have reached the age of eighteen years, the insured might make written application upon blanks furnished by the insurance company. The company would then issue a paid-up term policy payable to the estate of the insured.

The Union Central policies above described present an unusual situation. As originally issued, the proceeds thereof could not be included in the gross estate of the decedent for tax purposes. Chase National Bank v. United States, 278 U.S. 327, 49 S.Ct. 126, 73 L.Ed. 405, 63 A.L.R. 388; Treasury Regulations 80, Article 27.

The agreement attached to each policy, accepted almost four months after the policy was originally issued, causes the difficulty here. It is noted that although the agreement is dated the same as the policy, it evidently was actually signed by the decedent after the actual issuance of the policy, inasmuch as it contains the policy number. It may well be that the agreement was post-dated with the idea that it might become effective at the same time as the effective date of the policy, but, of course, it could not become effective until after it had been accepted by the insurance company.

It seems to be the settled law that a beneficiary can not be deprived of an interest in a life insurance policy without his consent where the right to change the beneficiary is not reserved. Morgan v. Penn. Mut. Life Ins. Co., 8 Cir., 94 F.2d 129; Davis v. Modern Industrial Bank 279 N.Y. 405 at page 409, 18 N.E.2d 639, 135 A.L.R. 1035.

Here prior to the attachment of the agreement to the policy the beneficiary was the owner thereof. Pennsylvania Co., etc., v. Commissioner of Internal Revenue, 3 Cir., 79 F.2d 293; Ruckenstein v. Metropolitan Life Ins. Co., 263 N.Y. 204, 188 N.E. 650.

Grave doubt may be entertained as to the validity of the agreement. However, no question as to its validity is raised here, and the effect of the agreement is in part to change the contingent beneficiary in each policy from the administrators, executors or assigns of the named beneficiary to the executors, administrators or assigns of the decedent. If we treat the agreement as valid, then there is a plain indication that, as between the insurance company and the decedent, the decedent was recognized and considered as the owner of the policy rather than the individual beneficiaries who were then less than five years of age.

The stipulated facts show that the insurance company, the executor of the estate of the decedent, and the beneficiary have considered all the terms of the agreement in full force and effect. The beneficiaries are now over the age of twenty-one years. A writing recognized and acted upon by all interested parties can not be discarded for tax purposes.

If it is recognized that the decedent was the owner within the language of Paragraph 34 of the policy and that he had the right to change the contingent beneficiary, there is no reason to deny to him the ownership and powers described in Paragraphs 19 to 23 inclusive; that is, the option to use the surrender value of the property (a) in the purchase of extended insurance; (b) for the purchase of paid-up insurance; (c) as a loan; and (d) to collect the surrender value in cash.

The plaintiff’s argument that the det cedent held no interest or incidents of ownership in the policies contradicts itself in the recognition of the effectiveness and validity of the terms of the agreement.

The Metropolitan Life Insurance Company policy, dated October 20, 1903, discloses that the insured, together with the named beneficiary, was possessed of the rights (a) to obtain a loan; (b) to surrender the policy for a cash value; (c) to surrender the policy and obtain a paid-up policy. In addition, the estate of the decedent was the beneficiary in the policy contingent upon the death of the named beneficiary.

The Union Central policies and the above Metropolitan policy can be disposed of upon the same legal principles. The proceeds of these policies come to the beneficiaries through the death of the insured. “Such a succession follows directly within Section 302-g”, Revenue Act of 1926, 26 U.S.C.A.Int.Rev.Code, § 811(g). Chase National Bank v. United States, 2 Cir., 116 F.2d 625.

The reasoning of Helvering v. Hallock, 309 U.S. 106, 60 S.Ct. 444, 84 L.Ed. 604, 125 A.L.R. 1368, is applicable to Section 302(g) of the Revenue Act. Chase National Bank v. United States, 2 Cir., 116 F.2d 625; Broderick v. Keefe, 1 Cir., 112 F.2d 293; Bailey v. United States, D.C., 31 F.Supp. 778; Commissioner Internal Revenue v. Washer, 6 Cir., 127 F.2d 446.

Under the Helvering case and the cases above cited, the test of taxability appears to be whether the transfer of the interests of the decedent in the proceeds of the policy was complete and irrevocable when the policy was brought into existence by his act, or whether full ownership and control by the beneficiary must await the death of the decedent.

The answer as to the three policies under consideration is obvious.

In the Union Central policies the beneficiaries could not transfer nor encumber the benefits thereof.

In the Metropolitan policy the beneficiary alone could not borrow thereon, obtain the cash value thereof; neither could she take advantage of the privilege of obtaining a paid-up policy.

The acts and interests of the decedent were an effective bar to these rights, which are incident to the complete ownership. If the beneficiary did not possess all of the incidents of complete ownership and control, it is obvious that they were owned or retained in part by the deceased, and his death was necessary to transfer them to the beneficiary.

In both the Union Central and Metropolitan policies the beneficiaries were never certain that they or their estates would become the complete owners of the benefits ■thereof, because of the contingencies of their prior deaths, which would vest all incidents of ownership in the deceased or in his estate.

The theory of the possibility of a reverter, as set forth in Bingham v. United States, 296 U.S. 211, 56 S.Ct. 180, 80 L.Ed. 160, is no longer applicable. °

“But since the decision in Helvering v. Hallock, 309 U.S. 106, 60 S.Ct. 444, 84 L.Ed. 604, 125 A.L.R. 1368, it is unnecessary to rely on the testamentary character of the transaction for it seems plain that when the death of the insured terminates all rights of his estate to receive payment under the policy and fixes them unalterably in the beneficiary, under the provisions of Section 302(g) the proceeds must be added to the estate of the decedent for purposes of taxation.” Chase National Bank v. United States, supra, 116 F.2d 625, 627.

The Metropolitan policy dated October 10, 1902, shows upon its face that the decedent possessed incidents of ownership therein, which requires the inclusion of the proceeds in the gross estate of the decedent. The provision permitting the payment by the company of the proceeds of the policy to certain individuals contemplates the right of the insured to designate a beneficiary, and such right would imply the right to change the beneficiary or designate successive beneficiaries. The decedent also had the unrestricted right to obtain a paid-up term policy, payable to his ■estate. These are incidents of ownership within the rules laid down in Chase National Bank v. United States, 278 U.S. 327, 49 S.Ct. 126, 73 L.Ed. 405, 63 A.L.R. 388.

“Where no express promise is made to pay any designated person, the administrator is the party to sue and may compel payment.” Howell v. John Hancock Mut. Life Ins. Co., 286 N.Y. 179, at page 185, 36 N.E.2d 102, 104.

The plaintiffs urge that a tax based upon the proceeds of the insurance policies taken out prior to the effective dates of the Revenue Act is unconstitutional. There 3s no merit in this contention. The tax is upon the transfer of decedent’s interest existing at the time of death. Chase National Bank v. United States, supra, 278 U.S. 327, 49 S.Ct. 126, 73 L.Ed. 405, 63 A.L.R. 388; Tyler v. United States, 281 U.S. 497, 50 S.Ct. 356, 74 L.Ed. 991, 69 A.L.R. 758; Commissioner of Internal Revenue v. Clise, 9 Cir., 122 F.2d 998.

The plaintiff also claims that in the case of the Union Central policies which are payable in installments according to the option elected by the insured, the full proceeds of the policies should not be taxed as the possession of same is withheld temporarily from the beneficiary. The death of the insured effected the complete transfer of the proceeds of the policies to the beneficiaries. They are the complete owners thereof. The time when they may obtain possession thereof is circumscribed by the terms of the agreement attached to the policies, but their ownership is no less complete. The value of the transferred property at the time of death is the measure of the tax. Helvering v. Hallock, 309 U.S. 106, 60 S.Ct. 444, 84 L.Ed. 604, 125 A.L.R. 1368; Commissioner of Internal Revenue v. Washer, 6 Cir., 127 F.2d 446; Igleheart v. Commissioner of Internal Revenue, 5 Cir., 77 F.2d 704.

The complaint is dismissed.

On Reargument

This case was originally submitted upon the theory that the decision, in so far as the two Union Central life insurance policies is concerned, involved only the question as to whether or not the designation by the insured of his estate as a contingent beneficiary required that the proceeds of the policies be included in the taxable estate of the insured. The Court was impressed that to decide the controversy upon the basis above mentioned would be to ignore the uncontested facts appearing upon the face of the policies; to-wit, that after the issuance of the two policies the contingent beneficiary therein was changed and a settlement option elected by an agreement signed by the insured and accepted by the insurer almost four months after the issuance of the policies. The conclusion was reached that the insured retained indicia of ownership in each of the policies which required that they should be included in his taxable estate.

Reargument was granted upon the application of the plaintiff, and a supplemental statement of facts was filed with the Court, which admit in evidence copies of four certain letters referring to the two policies in question which passed between the general manager of the insurance company at New York and Mr. Handy of the correspondence division of the home office of the insurance company at Cincinnati, Ohio.

Plaintiff claims that this additional evidence shows that each of the policies as originally written were not in accordance with the wish of the applicant; that the language of the agreement attached to each policy should have been contained therein as originally written, and that it was the intention of the parties that same be considered as a part of the application for each policy; thereby eliminating from this case the actions of the parties relative to the agreement, which the Court previously held to be a recognition of at least an indicia of ownership in said policies by the insured.

The defendant urges that the language of the four letters warrants no such conclusion.

The policies can not be reformed. The case must, therefore, be decided upon the evidence received and the interpretation of any ambiguity existing in the policies may be aided by the letters in evidence.

The language of the application attached to each policy and the language of the policy itself indicate that the insurance company intended to issue its policy in the first instance payable in a lump sum to a stated beneficiary upon either the endowment date or upon the receipt of due proof of death of the insured. All of the papers making up the application and the language of the policy itself indicate such intention.

It is apparent by the language of Paragraph 34 of the policy that if any of the settlement options contained in Paragraphs 35, 36 and 37 are to be made available, the owner of the policy may make such election by written notice, for which purpose a form will be furnished. This is a clear indication that the insurance company did not intend to make any of such options available until after the actual issuance of the policy.

This interpretation is further borne out by the language of the agreement itself, and confirmation thereof is found in the letter of August 18, 1924, wherein it is stated in substance that the writing agent of the company realized that the insurance company would not issue a policy containing the language necessary to cover “the trust fund plan”, and he actually intended to have settlement option papers prepared covering such plan after the policy was issued and accepted. The writing agent apparently knew that in order to express the full intention of the insured it would be necessary to have additional agreements relating to the settlement option prepared, signed by the insured, and accepted by the company, which could only be accomplished legally if the right to change the beneficiary had been reserved. Such reservation would require that the proceeds of the policies be included in the taxable estate of the insured.

Plaintiff claims that the language of the letters dated August 18 and August 22, 1924, indicates that the agreements should be and are to be considered as part of the application. Even if they be so considered, the fact that they were not accepted and did not become part of the contracts until September 8, 1924, can not be overlooked.

Paragraph 27 of each policy contemplates that the policies when issued, together with copy of the application attached thereto, shall constitute the whole contract. None of its terms shall be modified unless in accordance with the provisions of Paragraph 33.

The recognition of plaintiff’s claim would amount to a reformation of the insurance contracts without the necessary parties being before the Court or the revision of 'the contracts by judicial construction. The erroneous form of the application may have been the fault of the writing agent. He knew the wishes of the insured and he chose the procedure to be followed to give effect thereto; he intended to have insurance contracts prepared and delivered, and further intended to amend them by making substantial changes therein. This is just what he accomplished, and the insured recognized the contracts as amended as expressing his intention. Pie must have had knowledge of the procedure used, as he was a party to it. His estate can not escape the legal effect thereof.

When the policies were issued and delivered, the insured had the option of accepting or rejecting same in their entirety. He apparently accepted them, retaining them in their original form for over two months, and then succeeded in engrafting upon them the agreements accepted by the insurance company on September 8, 1924. The procedure may have involved poor workmanship, but the recognition of its validity by the insured, the beneficiary and the insurance company is binding upon the estate of the insured in this litigation.

The decision previously made by the Court on July 31, 1943 stands and the complaint is dismissed.


author: SHAW, District Judge.

text:
    UNITED STATES ex rel. HALL v. RAGEN, Warden.
    No. 44 C 349.
    District Court, N. D. Illinois, E. D.
    March 23, 1945.
    Paul E. Thurlow, of Chicago, 111., for relator.
    George F. Barrett, Atty. Gen., for respondent.
   SHAW, District Judge.

The petitioner in this case is a prisoner in the Illinois State Penitentiary at Joliet, Illinois, and by leave of Court has brought this suit in forma pauperis. The Court appointed Paul Thurlow of the Chicago Bar as amicus curia, and Mr. Albert A. Warner of the Central Howard Association of Chicago voluntarily associated himself with Mr. Thurlow in representing the petitioner.

The petitioner contends that he was denied due process of law in the Circuit Court of Macon County, Illinois, wherein he was convicted of robbery unarmed in connection with purse-snatching and was sentenced to an indeterminate term of imprisonment of one to twenty years in the Illinois State Penitentiary. He has exhausted his remedies in the Courts of Illinois and comes to this Court claiming the protection of the 14th Amendment.

He complains of a number of matters in connection with his trial which are not open for consideration in this Court because they could only be inquired of by writ of error and he is limited in this case to the sole question of whether or not he has been denied due process of law in connection with his conviction. On this point it is his contention that, in practical effect, he was denied the benefit of counsel on his trial and nothing more can be considered by me.

In his petition petitioner alleges that his attorney was engaged in numerous altercations with the Trial Court and the Assistant State’s Attorney which necessarily prejudiced him in the minds and presence of the jury; that during the course of the trial the Judge called his attorney and the Assistant State’s Attorney into his chambers and told the petitioner’s attorney that it would be useless for him to proceed further with the case, and that thereupon petitioner’s attorney left the Court; that the trial proceeded without him and he was convicted; that he was not represented by any counsel in the subsequent proceedings which would involve making a motion for a new trial and arrest of judgment. It appears from the petition that this case was taken to the Supreme Court of Illinois on writ of error and the judgment was there affirmed on motion. That Court could have taken no other action because there had never been any motion for a new trial in the Trial Court.

In Johnson v. Zerbst, 304 U.S. 458, 58 S.Ct. 1019, 1025, 82 L.Ed. 1461, 146 A.L.R. 357, the Supreme Court of the United States says:

“A judge of the United States — to whom a petition for habeas corpus is addressed— should be alert to examine ‘the facts for himself when if true as alleged they make the trial absolutely void.’ ”

Pursuant to this admonition from our highest court I have ordered the writ to issue in this case and proceeded to examine the facts for myself to determine if they are true as alleged, because I am convinced that if they are true the trial was absolutely void.

I am aware of the holding of the United States Supreme Court in Betts v. Brady, 316 U.S. 455, 62 S.Ct. 1252, 86 L.Ed. 1595, in which it is held that the due process required by the 14th Amendment does not incorporate, as such, the specific guarantees found in the 6th Amendment that are binding on Federal Courts as decided in Johnson v. Zerbst, supra. Nevertheless, it is a requirement of due process under the constitution of Illinois that an accused criminal shall be given the benefit of counsel, and it is clearly apparent from the decision in Betts v. Brady, supra, that had such a requirement been present in the laws of Maryland the decision in that case would have been necessarily different. It is to be noted that the opinion in the Betts v. Brady case reveals at some length the substances of the provisions of the constitutions of the original thirteen states and gives controlling weight to those provisions as they existed at the time of the adoption of the 14th Amendment. Indeed, the United States Supreme Court in Powell v. Alabama, 287 U.S. 45, 53 S.Ct. 55, 77 L.Ed. 158, 84 A.L.R. 527, and many other cases has frequently stated that the right to counsel in a criminal proceeding is fundamental. I take it that as a fundamental right it is guaranteed in the Federal Courts by the 6th Amendment and in the State Courts by the 14th. On this theory of the case the question necessarilj' comes to a Federal Court for examination and decision under the Federal Constitution, and to decide this question we must review the facts as apparent on this hearing.

On the hearing in this case the petitioner testified in his own behalf but produced no other evidence beyond his own testimony and his sworn petition. It was proved and the Court could take judicial notice of the fact that other witnesses for the petitioner would have had to be brought from Decatur, Illinois, approximately 200 miles from Chicago where this hearing was held, and without funds such witnesses could not be produced. Neither were there any funds available for stenographic and other charges necessary for taking depositions. The Assistant State’s Attorney who tried the defendant in the Circuit Court of Macon County was present in Court and testified, as will appear from the record. The Trial Judge who cried the defendant was also present in Court, as will appear from the record, hut did not testify. After the Assistant State’s Attorney had testified the Court announced from the bench that he took notice of the presence of the Honorable Charles Y. Miller, Judge of the Circuit Court of Macon County, Illinois, and asked the Assistant Attorney General, representing the respondent, if he cared to produce him as a witness. The Attorney General made no reply. The Attorney General did not call him as a witness and the Court announced that in view of the presence of the Trial Judge in Court this Court would assume as true the statements of the sworn petition unless they were further explained by the Trial Judge, and announced a recess to give the Attorney General time to decide whether or not he should call him. The hearing was later resumed and the Trial Judge did not testify. I, therefore, assume that the testimony of the petitioner and the statements of the sworn petition are true as alleged except and to the extent that they may have been specifically controverted by the Assistant State’s Attorney, as will be noted.

The only thing approaching a controversy as to the facts arises from the testimony of Fred G. Leach, who had been the Assistant State’s Attorney who tried this case, and that was in a very slight and somewhat immaterial degree. His testimony may as well be considered as corroborative as contradictory to that of the petitioner. So far as the transactions in open court are concerned, his testimony is entirely corroborative of the testimony of the petitioner. He testified that in the Judge’s chambers the Judge explained to Mr. Buxton that he was sustaining objections to the questions and that he felt to continue with that argument would prejudice the defendant.

The petition in this case with its supplements and amendments is of considerable length and by reason of its inexpert preparation is somewhat confusing. It was prepared by the petitioner himself, for the most part printed in ink rather than being written or typewritten, and has required considerable care to try and sort out the material from the immaterial — the competent from the incompetent and the relevant from the irrelevant. The best that I have been able to do with it is to draw certain conclusions of fact from the entire petition, the numerous exhibits and the testimony taken in open court.

My conclusions from all of these sources may be summarized. The petitioner Hall was charged with unarmed robbery by indictment of the Circuit Court of Macon County, Illinois, because of a purse-snatching incident involving himself and another defendant and was duly indicted and convicted on this charge. When he was arraigned for trial, being without funds, an attorney was appointed for him but never interviewed him or took any part in the subsequent proceedings. Thereafter the petitioner’s mother employed one T. C. Buxton, a doctor who was at that time licensed to practice law blit who has since been disbarred, to represent the petitioner at the trial. There is no report of proceedings at that trial nor any stenographic report of the evidence, so I have little to go by as to what actually happened. However, it is clear and I do find that at the conclusion of the case for the State a witness for the defendant was called to the stand but never was permitted to testify. The Attorney Buxton repeatedly asked incompetent questions to which objections were repeatedly sustained and the matter degenerated into a violent argument between Buxton, the Assistant State’s Attorney and the Court. The petitioner testified, and the Trial Judge did not deny, that the Judge got mad and pounded the bench and thereupon called Buxton and the Assistant State’s Attorney into his chambers. When they came out of chambers, Attorney Buxton told the petitioner that he could do no further good by going on with the trial and that the Judge had told him in chambers that he might as well not attempt to do anything more for his client. The Assistant State’s Attorney testified that all the Judge did in chambers was to explain to Buxton his reasons for sustaining objections, and it is again to be noted that the Trial Judge sat in my courtroom while this case was being tried by me and was not called upon to testify although it was suggested that he do so. At any rate, the witness left the stand without giving any testimony and neither the defendant himself nor another witness whom he then had present in Court were called. Each of the attorneys made some remarks to the jury, the jury retired and Buxton left the Court.

There is a conflict in the testimony between the Assistant State’s Attorney, who tried the case, and the petitioner as to whether or not the Attorney Buxton was in Court when the verdict was rendered, but if he was in Court he did nothing for the petitioner, because there was never any motion for a new trial made. This is another point which could have been settled by the Trial Judge had he seen fit to do so. About ten days after this verdict was returned and without any motion for a new trial being made, nor any motion in arrest of judgment entered, and clearly and definitely without the presence of any attorney for the petitioner, the sentence and judgment here in question were entered of record, the mittimus issued and the prisoner taken to the penitentiary where he has remained for the last two years.

The Assistant State’s Attorney who tried this case testified in this Court that one of the reasons for halt of the trial and going into the Judge’s chambers was because he and the Judge felt that Buxton was prejudicing the defendant in the presence of the jury.

A few days after this trial and on behalf of the Macon County Bar Association, the Assistant State’s Attorney who had tried the case prepared and filed an information in the Circuit Court of Macon County seeking to disbar and suspend the Attorney Buxton from practice in the Circuit Court of Macon County, because of Buxton’s alleged subornation of perjury in another case tried about that time and partly because of his demonstrated incompetence in the trial of this petitioner. In that petition it was alleged and afterwards found by the Circuit Court who tried this case that Buxton was not capable of protecting the rights of litigants in any Court, either civil or criminal, or of practicing law before any Court and suspended him from practice. His name was afterwards, on his own motion, stricken from the roll of attorneys by the Supreme Court of Illinois, so he is no longer an attorney of the Bar of this State.

It would have been possible in this case with available funds to have given this Court a much clearer picture of what actually happened in this trial and it would have been much more satisfactory to the Court if the Attorney General had seen fit to call the Trial Judge to the witness stand while he was sitting in Court. It is difficult to get an actual picture of what actually happened in the courtroom during this trial from what has been presented, but the petitioner presented a long list of witnesses whom he wished called and who could not be called because of their distance from Chicago and the lack of money to advance their mileage and witness fees at approximately $25 each, or even to take their depositions at considerable stenographic charge. The Attorney General could have brought in this evidence, and to some degree I think myself justified in drawing unfavorable inferences from his failure to do so. Clearly there is enough before the Court to justify the inferences I have drawn and it is certain that the people of the State of Illinois possess the resources to have given a more complete picture of the matter had they seen fit to do so. There is in the record a copy of a petition sent to the Parole Board of Illinois, asking release of this prisoner, a statement that he did not have a fair trial which is signed by 53 residents of Decatur and the first signer was foreman of the jury who tried the case. I recognize the principle that a juror cannot impeach his own verdict and yet something must have happened in that courtroom which impelled such an unusual action. To a certain degree it is corroborative of the inferences I have drawn.

It is my conclusion as a matter of law that this man was not convicted by due process of law within the meaning or spirit of the 14th Amendment. It has been repeatedly held in the Supreme Court of Illinois and the Supreme Court of the United States, and I believe is universally the rule, that it is as much the duty of the State’s Attorney and the Trial Judge to protect the rights of the defendant on trial as it is the duty of the State’s Attorney to secure a conviction. It is clear beyond question from this record that this man was not defended by an attorney but only by a doctor who through some accident held a license to practice law and who was shortly thereafter disbarred. When it became apparent to the prosecuting attorney, as he testified in this Court, that the interests of the defendant were being prejudiced by the ignorant mouthings and unintelligent and belligerent attitude of this doctor-lawyer it was his duty to ask for a mistrial, and due process of law required that he should not have permitted the farce to go farther. The same duty devolved upon the Trial Judge in even a higher degree. It is not due process to permit a defendant ignorant of law to be misrepresented and prejudiced by the ignorance and misconduct of someone pretending to represent him. Neither was it within the limits of due process to permit this trial to proceed to a verdict and to a final judgment without counsel representing the defendant.

The right to counsel does not apply to any particular moment during a trial but during the entire trial, and there is no point in a trial at which a defendant is more in need of expert guidance than after verdict. Necessary technicalities have to be met if defendant’s rights are to be preserved, as is clearly demonstrated in this case. No defendant unskilled in law would know how to make a motion for a new trial nor even know of the necessity for a motion for a new trial nor the reasons for those necessities. No layman would understand that unless a trial judge is given the opportunity to correct his own errors by a motion for a new trial there is nothing of which he can thereafter complain in a court of review so far as the proceedings at the trial were concerned. No one not a lawyer would realize that without a duly certified and filed report of proceedings at a trial there would be nothing upon which the Supreme Court of Illinois could act in attempting to review those proceedings. In short, when this man was abandoned by his attorney or according to his version the attorney was ordered out of the case, he was finished so far as any appellate review in Illinois was concerned and unless the Trial Judge saw fit to order a new trial of his own motion, which was not done, no other court in the State could do anything for him by way of reviewing the proceedings up to that point.

This petitioner has exhausted his State remedies through application to State Courts for habeas corpus, including an application to the Supreme Court of Illinois, upon which certiorari has been denied by the Supreme Court of the United States. 323 U.S. —, 65 S.Ct. 435. So far as the record before me shows, no Court has heretofore reviewed the facts presented in this Court. In fact, on the very day this opinion is being written the Supreme Court of Illinois has, ■ for the first time by bench announcement, made public its long settled policy of never taking a habeas corpus case if it involved inquiry into questions of fact. This new announcement will make clear to many lawyers and many other courts the reasons why so many of the petitions for habeas corpus have been denied by that Court without opinion.

It is my conclusion that this petitioner was not convicted by due process of law as guaranteed by the 14th Amendment of the United States Constitution; he will therefore be discharged.

Petitioner discharged.