author: KENISTERLY, District Judge.

text:
    BIGLEY v. UNITED STATES.
    No. 1992.
    District Court, S. D. Texas, Houston Division.
    April 9, 1934.
    Edgar Soule, of Houston, Tex., for plaintiff.
    H. M. Holden, U. S. Atty., and M. S, McCorquodale, Asst. U. S. Atty., both of Houston, Tex., for defendant.
   KENISTERLY, District Judge.

By original petition, filed in this court September 3, 1932, plaintiff, a former soldier, claiming total permanent disability, sued defendant on a war risk insurance policy issued to plaintiff by defendant, August 3, 1918. January 10, 1934, plaintiff filed amended petition, and this is a hearing (both on the law and the facts) .under District Court Rule 25 (amended rules of January 1, 1934), of defendant’s plea or motion raising the question of the jurisdiction of this court.

1. That ordinarily the United States of America may not be sued, and that in suits of this character, plaintiff must plead and prove facts showing jurisdiction, is well settled. Miller v. United States (D. C.) 57 F.(2d) 889; Mara v. United States (D. C.) 54 F.(2d) 397, 399; Gallardo v. United States (D. C.) 5 F.(2d) 678; United States v. Lyke (C. C. A.) 19 F.(2d) 876; United States v. Jackson (C. C. A.) 34 F.(2d) 241, 73 A. L. R. 316; Manke v. United States (C. C. A.) 38 F.(2d) 624; Berntsen v. United States (C. C. A.) 41 F.(2d) 663; United States v. Burleyson (C. C. A.) 44 F.(2d) 502; United States v. Ranes (C. C. A.) 48 F.(2d) 582; Smith v. United States (D. C.) 56 F.(2d) 636; Maulis v. United States (D. C.) 56 F.(2d) 444; Taylor v. United States (D. C.) 57 F.(2d) 331; Kelley v. United States (D. C.) 59 F.(2d) 743; Griffin v. United States (C. C. A.) 60 F.(2d) 339.

2. Testing first the jurisdiction under plaintiff’s original petition, filed September 3, 1932. In such original petition, plaintiff alleges that he became totally permanently disabled December 3,1918. And this suit not having been brought within six years after December 3, 1918, when his right of action accrued, or within one year after July 3, 1930 (see World War Veterans’ Act 1924, § 19, as amended by Act March 4,1925, § 2, 43 Stat. 1302, as amended by Act May 29, 1928, § 1, 45 Stat. 964, and Act July 3, 1930, § 4, 46 Stat. 992 [38 USCA § 445]), this court was without jurisdiction of plaintiff’s suit as presented in his original petition.

There is an allegation in such original petition that the United States Veterans’ Bureau, on September 21,1931, denied plaintiff payment of his elaim, and that thereby there existed a disagreement, etc. There is therein, however, no allegation, nor is there proof, of the time of filing of plaintiff’s elaim with the bureau, and the time between such filing and such denial is not alleged nor shown so as to enlarge the time for filing suit, beyond one year after July 3,1930.

3. In plaintiff’s amended petition (filed January 10, 1934), he alleges as his first cause of action, the issuance August 3, 1918, of the policy of insurance, total permanent disability December 3, 1918, that plaintiff’s claim was filed with the bureau on or about October 10, 1930, and such elaim denied September 21, 1931. It will thus be seen that if the period of suspension between the filing with the bureau of plaintiff’s claim, and its denial by the bureau, be considered, the suit still was not filed in time, and this court is without jurisdiction. And this is true whether it be regarded as filed on September 3, 1932, or on January 10, 1934. See Anderson v. United States (D. C.) 5 F. Supp. 269; Hipkins v. United States (D. C.) 1 F. Supp. 505; Carson v. United States (D. C.) 37 F.(2d) 946.

Apparently in an effort to avoid this effect, plaintiff alleges (note 2) that on or about the 13th day of February, 1932, he received in an envelope, postmarked “Washington Feb. 9 3PM 1932,” a letter under date of September 21, 1931, advising him of the denial of his claim, etc. In his original petition, plaintiff states and makes oath that he received such letter about September 21, 1931. Defendant’s evidence (affidavit of McCorquodale) shows that plaintiff knew of the denial of his claim as early as about September 21, 1931, and this, plaintiff does not controvert nor deny. He chooses to. stand upon the uncertain and evasive pleadings quoted. I find that plaintiff had notice and knowledge of the denial of his claim as early as about September 21,1931, as alleged in his sworn original petition, and that, as stated, this court is without jurisdiction of plaintiff’s first cause of action set up in his amended petition, i. e., his cause of action based upon the claim that he became totally permanently disabled December 3, 1918.

But plaintiff, in his amended petition, abandons the claim of jurisdiction in this court by reason of the denial of his claim by the bureau on September 21, 1931. He alleges that between January, 1933, and January 10, 1934 (the date of filing such amended petition), he again submitted his claim to the bureau, and that it was again denied, the date of the denial not being given. In other words, plaintiff apparently insists that his claim was not only pending before the bureau from October 10, 1930, to September 21, 1931, hut in addition, from January, 1933, to January 10, 1934, and that that period should also be considered in determining whether his suit was filed in time. If so considered, plaintiff’s amended petition was still not filed in time in so far as his first cause of action is concerned, and this court is without jurisdiction thereof.

4. Plaintiff brings forward for the first time in his amended petition (in the altemative) a second and new cause of action, iu that he seeks to recover on such policy of insurance, alleging that he became totally permanently disabled “on or about the month of April 1930.” This is an entirely separate and distinct cause of action from that asserted in plaintiff’s original petition.

Congress by the Act of March 20, 1933, § 17 (section 717, title 38 USCA), repealed all laws granting or pertaining to yearly renewable term insurance, but such act contains an exception in the following language:

“Provided, That nothing contained in this section shall interfere with payments heretofore made or hereafter to be made under contracts of yearly renewable term insurance which have matured prior to the date of enactment of this chapter and under which payments have been commenced, or on any judgment heretofore rendered in a court of competent jurisdiction in any suit on a contract of yearly renewable term insurance, or which may hereafter be rendered in any such suit now pending.”

At the time of the approval and taking effect (March 20, 1933) of such act, there was no suit pending wherein plaintiff was seeking to recover on a cause of action under such policy of insurance accruing “on or about the month of April 1930,” and, therefore, plaintiff’s suit on such cause of action subsequently instituted may not be prosecuted or maintained here.

In fact I incline to the view (but find it unnecessary to decide) that plaintiff having abandoned the grounds of jurisdiction set forth in his original petition, and this court having no jurisdiction of plaintiff's suit under his original petition, plaintiff’s suit stands now as if he had never filed such original petition, and presents in effect a suit instituted for the first time on January 10, 1934, on the two causes of action referred to, and on the allegation of a disagreement some time between January, 1933, and January 10, 1934. Mara v. United States (D. C.) 54 F.(2d) 397; Taylor v. United States (D. C.) 57 F.(2d) 331; Hansen v. United States (C. C. A.) 67 F.(2d) 613; Anderson v. United States (D. C.) 5 F. Supp. 269; United States v. Bass (C. C. A.) 64 F.(2d) 467. But see Dobbie v. United States (D. C.) 19 F.(2d) 656, 657. And that such Act of March 20, 1933 (38 USCA § 701 et seq.), bars its prosecution here.

It follows that defendant’s plea to the jurisdiction should be sustained, and plaintiff’s suit dismissed. Let an order be prepared and presented accordingly.

       “Plaintiff further alleges that he has made the necessary and required demand on the duly authorized agents of the United States, to-wit, the U. S. Veterans’ Bureau, which has charge of the administration of said claims of War Risk Insurance, and he has made specific demand for the payment of his insurance policy, and they have continuously refused to pay same until, to-wit, Sept. 21st, 1931, at which time he received a letter which read in part as follows:
      “ ‘Under the circumstances there exists a disagreement as contemplated within the provisions of section 19, World War Veterans’ Act, as amended July 3, 1930’, by reason of which a disagreement exists and this Court has jurisdiction of this cause.”

       “Plaintiff further alleged that he has made the necessary and required demand on the duly authorized agents of the U. S., to-wit, the United States Veterans Bureau, which has charge of the administration of said claims of war risk insurance, and he has made specific demand for the payment of his insurance policy, and they have continuously refused to pay same until, to-wit, said claim for such insurance payment was presented first on or about October 10, 1930, to the District or Local Board at San Antonio, which said Board denied such claim on or about November 12, 1930, that then and thereafter, he appealed to Section ‘O’, Central Board of Appeals at New Orleans; that thereafter his said appeal was sent by the District Board or Office to the Council on Appeals at Washington; that he was thereafter informed under date of August 26, 1931, that the Insurance Claims Council had denied his claim; and that thereafter this Plaintiff appealed to the Administrator of Veterans’ Affairs; that thereafter, to-wit, on or about the 13th day of February, 1932, this Plaintiff received in an envelope postmarked ‘Washington Feb 9 3 PM 1932’ a letter under date of September 22 (21), 19.31, advising him that the Administrator of Veterans’ Affairs had affirmed the decision rendered by the Insurance Claims Council, and that, under the circumstances, there exists a disagreement as contemplated within the provisions of Section 19, World War Veterans’ Act, as amended July 3, 1939, by reason of which disagreement this Court has jurisdiction of this cause.”

       “The original petition herein alleges’ that said claim for insurance was denied on September 21, 1931, and said allegation is hereby referred to and incorporated herein as an admission by the plaintiff that such date of denial was correct. The first amended original petition herein likewise alleges denial of the plaintiff for insurance benefits on September 21, 1931; the defendant alleges on information and belief that notices of said denial were, on or about September 21, 1931, properly addressed and mailed to the plaintiff herein and his agents and that plaintiff well knew of said denial. The allegation that plaintiff well knew of said denial is based upon admission in writing by the insured veteran on the file of the Veterans Bureau that he knew of said disagreement prior to receipt of the letter referred to in Paragraph 3 of the first amended original petition as having been received on or about February 13, 1932.”

       “Plaintiff avers that by reason of the aforesaid agreement of attorneys and his performing Ms part of the contract and by having said cause reopened, and Ms appearing before the Rating Board,' now es-tops the defendant from pleading the Statute of Limitations as a bar to any right of recovery to which the plaintiff may be entitled. That the Veterans Administration after reopening said cause has refused to approve the claim for insurance. That by reason of its refusal to pay or recommend payment thereof this plaintiff is now entitled to proceed to trial with this cause upon its merits.”

       “Plaintiff alleges, in the event that he is mistaken that he has become totally and permanently disabled as of Dee. 3, 1918, he pleads in the alternative that he was on and prior to Dec. 3, 1918, by reason of Ms military service, partially disabled to the extent of twenty-five (25) per cent, as shown by Ms service records now in the possession of the Defendant; that by reason of said partial disability the Plaintiff became entitled to receive compensation at.the rate of a 25% disability; that the Defendant has refused and failed to pay said compensation, and has retained all such sums due the Plaintiff; that in the event the Plaintiff was only twenty-five per cent, disabled he was entitled and is now entitled to have said payments made on the premiums of Ms said War Risk Insurance policy, which, if paid, wonld have prevented the lapsing of said policy, if said policy has elapsed for failure to have paid the premiums thereon. Plaintiff pleads further that he has been more than twenty-five per cent, disabled at all times since Ms disability arose during his military service ; that Plaintiff is entitled now to have all such sums retained by Defendant applied upon the premiums of said policy;
      “In connection with the foregoing allegation this plaintiff avers that the defendant has recognized the fact that he is totally and permanently disabled, and unable to carry on any gainful occupation from which he might receive compensation. That such total disability was recognized by the defendant during the year, on or about the month of April 1930, and at all times since said date. That by reason of the laws and regulations in effect governing payments of premiums on insurance policies and contracts this plaintiff said that no premium was due on Ms contract of insurance, at any time after his disability became total and permanent, irrespective of the date thereof.”


source: Caselaw Access Project

author: CAMPBELL, District Judge.

license: Public Domain

text:
    FEIST v. DRUCKERMAN et ux.
    No. 6283.
    District Court, E. D. New York.
    Feb. 8, 1933.
    Lewis, Marks & Kanter, of Brooklyn, N. Y. (Lloyd B. Kanter, of Brooklyn, N. Y., of counsel), for plaintiff.
    Edward Weinfeld, of New York City, for defendants,
   CAMPBELL, District Judge.

This is a suit by a trustee in bankruptcy to set aside a conveyance made by the bankrupt to his wife, as fraudulent.

On October 15, 1930, the bankrupt was the owner of an undivided one-half interest in a large parcel of land, and the sole owner ' of two contiguous small triangular parcels of land, located at Woodhaven boulevard, borough of Queens, city of New York. The bankrupt’s wife was the owner of the other undivided one-half interest in the large parcel.

The value of all three parcels, as of October 15, 1930, was $50,000, and the value of the interest of the bankrupt was $25,000'.

The interest of the bankrupt was incumbered by a mortgage, originally of $10,000, reduced to $7,000, and unpaid taxes and assessments.

The said bankrupt conveyed his entire interest in the property subject to the mortgage, taxes, and assessments to his wife, by deed dated October 15; 1930, and recorded on October 23, 1030.

At the time of the conveyance by the bankrupt to his wife, the bankrupt was indebted to two banks in the aggregate sum of $85,-000, and the indebtedness still remains unpaid to the extent ofN$42,500.

The conveyance by the bankrupt to his wife was without consideration and therefore voluntary.

The consideration expressed in the deed in question, from the bankrupt to his wife, was $1 and other valuable consideration.

The plaintiff, in addition to offering the deed in evidence, called the bankrupt as his witness.

I saw and heard the witness, and I entirely disbelieve the story he. told as to the agreement of the wife to assume the payment of the mortgage, taxes, and assessments, and am confirmed in that belief by the fact that the deed to her contains no provision assuming the obligations and agreeing to pay the same, but simpiy that the property is taken subject to the mortgage," taxes, and assessments.

Further, we must not lose sight of the fact that it was the brother of the bankrupt that it is claimed was pressing for payment of the mortgage, which the bankrupt contends caused him to make the conveyance in question, but there is no evidence that the mortgage has been paid. The $3,000 that was paid on account of the mortgage was paid by the bankrupt, and the taxes and assessments which were in arrears covered by the undivided one-half interest of the bankrupt, and the undivided one-half interest of the bankrupt’s wife in the large parcel.

TI] I am convinced that the conveyance by the bankrupt to his wife was a voluntary one, and intended to put the property beyond the reach of his eredit.ors.

Wadleigh v. Wadleigh, 111 App. Div. 367, 97 N. Y. S. 1063, and Meyer v. Mayo, 196 App. Div. 78, 187 N. Y. S. 346, cited on behalf of the defendants, do not sustain their contention.

The conveyance in question antedated the filing of the petition in bankruptcy by more than four months, and the trustee’s right of action is derived from- section 70e of the Bankruptcy Act, title 11, § 110 (e), United States Code, 11 USCA § 110 (e), so much of which as is necessary for consideration at this time reads as follows:

“The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the'date of the adjudication. * * * ”

It is therefore necessary to show a right of recovery under the laws of the state of New York*.

Section 276 of the Debtor and Creditor Law (Consol. Laws, e. 12), chapter 254 of the Laws of the state of New York of 1925 (section 1), in effect April 1, 1925, provides as follows:

“Conveyance made with intent to defraud. Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.”

The burden of proof was on the trustee to show that the conveyance was made with the intent to defraud.

The courts of New York state have held that a voluntary conveyance made, when the evidence showed that there was an existing indebtedness, is presumptively fraudulent. Smith v. Reid, 134 N. Y. 568, 31 N. E. 1082; Kerker v. Levy, 206 N. Y. 109; 99 N. E. 181.

The plaintiff having shown that the conveyance was voluntary, and that at the time of its making there was an indebtedness which is still existing, the burden is on the defendants to rebut the presumption of fraud, and it was not for the plaintiff to show what other property was retained, until the presumption is repelled. Ga Nun v. Palmer, 216 N. Y. 603, 111 N. E. 223; Smith v. Reid, supra; Klinger v. Hyman (C. C. A.) 223 F. 257.

The defendants offered no evidence, but rested at the close of plaintiff’s ease, and moved to dismiss upon the ground that the plaintiff had failed to establish a cause of action, in that he did not prove fraudulent intent on the part of the grantor, knowledge on the part of the grantee of the fraudulent intent and purpose on the part of the grantor, and/or insolvency of the grantor at the time of the conveyance.

The fraudulent intent of the grantor has been sufficiently shown, and the presumption has not been rebutted.

The fraudulent intent of the grantor having been established, and a valuable consideration not having been given at the time of the conveyance, the burden is upon the grantee to show her innocence of such intent. Berlenbach v. Bischoff, 137 Misc. 719, 244 N. Y. S. 369, affirmed 231 App. Div. 734, 245 N. Y. S. 744; Emmi v. Patane, 128 Misc. 901, 220 N. Y. S. 495.

Since the enactment of chapter 254 of the Laws of the state of New York of 1925, in effect April 1, 1925 (section 1), known as article 10 of the Debtor and Creditor Law (section 270 et seq.), in all eases respecting fraudulent conveyances, it is the law as to all classes of property, that when the fraudulent intent of the grantor has been shown, the grantee must come in and defend his title both as to fair consideration and as to honest purpose.

The intention of the Legislature to substitute section 276 of the Debtor and Creditor Law, supra, for section 263 of the Real Property Law (Consol. Laws, e. 50) seems clear, as sections 262, 263, and 264 of the Real Property Law were repealed (see Laws 1925, c. 254, § 4), coincident with the enactment of article 10 of the Debtor and Creditor Law.

While it is difficult to understand why sections 265 and 266 of the Real Property Law were not specifically repealed, yet, inasmuch as sections 262, 263, and 264 were declaratory of the law of fraudulent conveyances, with their repeal fell section 265 and section 266, which were qualifying provisions, and section 278 of the Debtor and Creditor Law was intended to supersede section 266 of the Real Property Law, which is not applicable to the instant case.

The Debtor and Creditor Law being the later enactment and in conflict with the Real Property Law, the Debtor and Creditor Law must control. Berlenbaeh v. Bisehoff, supra; Emmi v. Patane, supra.

The rule of law laid down in Starin v. Kelly, 88 N. Y. 419, cited by defendants, decided before the enactment of article 10 of the Debtor and Creditor Law, is no longer the law of this state.

The plaintiff is entitled to a decree as prayed for in the complaint.

A decree may be entered in accordance with this opinion.

Submit proposed findings of fact and conclusions of law in accordance with this opinion, for the assistance of the court, as provided by the rules of this court. Settle decree on notice.


author: KNIGHT, District Judge.

text:
    In re LAWROW.
    No. 21554.
    District Court, W. D. New York.
    May 1, 1934.

      John W. Hollis, of Homell, N. Y., for petitioner.
    Shults & Shults, of Hornell, N. Y., for judgment creditor.
   KNIGHT, District Judge.

Petitioner was adjudicated a bankrupt on the 6th day of April, 1934. Prior thereto he had made an assignment of wages to Nicholas Argentieri, a creditor. Judgments had been secured against him by three other creditors and garnishee executions issued to the Erie Railroad Company, his employer. Petitioner requests an order restraining these creditors and the Erie Railroad Company from interfering with or holding up his wages. The assignment creditor opposes the granting of the relief on the ground that the assignment was a security obtained more than four months prior to the bankruptcy.

An assignment of future wages is no more than a contract until the wages are earned, and no lien attaches to wages earned after adjudication, and the obligation thereof, like other personal obligations, is discharged by bankruptcy. In re Blosser (D. C.) 2 F. Supp. 537; Seaboard Small Loan Corp. v. Ottinger (C. C. A.) 50 F.(2d) 856, 77 A. L. R. 956. Likewise, a garnishee execution does not attach as a lien until the wages are earned. In re Prunotto (D. C.) 51 F.(2d) 602.

It appearing from the affidavit of the petitioner that all of the debts above mentioned are dischargeable, the bankrupt is entitled to an order restraining the creditors from proceeding against his wages until the expiration of twelve months from the date of adjudication, unless he shall sooner apply for a discharge, and in such case until the question of such discharge shall be determined. Bankrupt is not entitled to an order restraining the employer from retaining his wages to the extent of the assignment and the garnishee executions until his discharge is granted, as failure to obtain such discharge would leave the obligations alive and the assignment and executions effective.

An order may be entered in accord herewith.


author: WATSON, District Judge.

text:
    UNITED STATES, to Use of AMERICAN TAR PRODUCTS CO., v. SEVERIN et al.
    No. 3397.
    District Court, M. D. Pennsylvania.
    April 24, 1934.
    Jenkins, Turner & Jenkins, of Wilkes Barre, Pa., for plaintiff.
    Welles, Mumford & Stark, of Scranton, Pa., for defendants.
   WATSON, District Judge.

This ease came on to be heard upon a rule granted at the request of Neil P. Severin and Alfred D. Severin, a copartnership trading as N. P. Severin Company, to show cause why the service of the summons should not be set aside and the writ of summons quashed. The petitioners for the rule appeared de bene esse, for the purpose of raising the question.

The suit is brought under section 270, title 40 USCA, in the name of the United States of America, to the Use of American Tar Products Company, for labor and materials furnished N. P. Severin Company, one of the defendants, which had contracted with the United States for the demolition of structures on the site, and construction of the new building for the post office and courthouse at Scranton, Pa. The suit is upon the bond of the defendants with the Commonwealth Casualty Company as surety. By the terms of said bond, both principal and surety acknowledged themselves to be jointly and severally liable.

In United States v. Congress Construction Company, 222 U. S. 199, 32 S. Ct. 44, 56 L. Ed. 163, it was held that the provision restricting the plaee of suit operates pro tanto to displace the provision of the Judicial Code, and authorizes the court wherein the action is required to be brought to obtain jurisdiction of the persons of the defendants through the service upon them of its process in whatever district they may be.

The rule to show cause, however, raises an additional question which presents more difficulties and necessitates a consideration of the facts. The writ of summons was directed to the marshal of the Middle district of Pennsylvania. The return was made by the marshal of the Northern district of Illinois, and reads as follows:

“Marshal’s Return .
“I have executed this writ by serving the within named Neil P. Severin and Alfred D. Severin, a co-partnership, trading as N. P. Severin Co., by reading and delivering a copy thereof to Alfred D. Severin, one of the co-partners, this 22nd day of September, A. D. 1933. The other witliin named defendants not found in my district.
“H. C. W. Laubenheimer, U. S. Marshal,
Northern District of Illinois.
“By R. D. Holcomb, Deputy.”

It is to be noticed that the return fails to state where the attempted service was made. The records of the clerk of this district show that the writ, after being issued, was sent September 5, 1933, to the attorneys for the plaintiff, and do not show that the writ was ever placed in the hands of the marshal for the Middle district of Pennsylvania for service. The records of the marshal for the Middle district of Pennsylvania do not show that the writ was ever placed in his hands. No writ was directed to the marshal of the Northern district of Illinois for service.

A marshal is not authorized to serve process outside of his district, nor to serve process directed to the marshal of another district. U. S. v. Palmer et al. (D. C.) 18 F.(2d) 997. So far as Alfred D. Severin or N. P. Severin Company are concerned, the writ, after being issued, was placed in the hands of rio person having authority to make service of it. “When a Marshal serves process in a manner or in a place without authority of law, jurisdiction over the person so served is not acquired by the court for which the Marshal has attempted to act.” Petty & Co., Inc., v. Dock Contractor Co., 283 F. 341, 344, Circuit Court of Appeals, Third Circuit.

Now, April 24, 1934, the rule to show cause why the service should not be set aside is made absolute, and the service is set aside. The rule to show cause why the writ of sum • mons should not be quashed is discharged.


author: JOHNSON, District Judge.

text:
    JENNINGS et al. v. DELAWARE & HUDSON CO.
    No. 1942.
    District Court, M. D. Pennsylvania.
    May 7, 1934.

      Robert M. Bernstein, of Philadelphia, Pa., and A. M. Lucks, of Scranton, Pa., for plain'tiifs.
    Paul Bedford and Prank A. MeGuigan, both of Wilkes-Barre, Pa., for defendant.
   JOHNSON, District Judge.

The facts of this ease, more fully set forth in Delaware & Hudson Co. v. Jennings et al. (C. C. A.) 64 F.(2d) 531, 532, are briefly as follows: Suit was brought to recover for injuries to minor plaintiff sustained while passing over defendant’s railroad tracks. Plaintiffs filed their statement of claim June 2, 1927, describing the place of the accident as being “at a point near the said Stevens Point.” On January 13, 1928, plaintiffs amended their statement by placing the accident at “a point opposite the Stevens Point post-office,” such place making minor plaintiff a “trespasser.” On trial the proofs placed the accident at a grade crossing, thereby making minor plaintiff a “wayfarer,” and a new trial was granted because of the variance. On March 13,1931, plaintiffs filed their second amendment, which definitely placed the accident at the grade crossing. After the second trial, resulting in a verdict for the plaintiffs, the ease was appealed to the Circuit Court of Appeals, which held that plaintiffs could not prevail because the second amendment set up a new cause of action barred by the statute (12 PS Pa. § 34).

Plaintiffs now ask this court for leave “to withdraw the amended statement of claim filed on January 13, 1928, to the end that upon the new trial the pleadings shall conform to the proofs already offered, which show that the accident happened at the grade crossing.”

If this court should grant petitioners’ prayer, it would be doing the very thing that the Circuit Court in this case held could not be done, to wit, permit an amendment changing the cause of action after expiration of the two-year limitation period. The Circuit Court there said: “It is, we think, plain that by the second amendment the plaintiffs declared for the first time the grade crossing was the place of the accident.” This court cannot now permit plaintiffs to amend and thus enable them to sue on the eause of action which was first asserted after the statute of limitations had run, regardless of the method used to attain that end.

And now, May 7, 1934, plaintiffs’ rule to show cause is dismissed.


author: BYERS, District Judge.

text:
    In re DOREMUS.
    No. 23835.
    District Court, E. D. New'York.
    April 27, 1934.
    Ben Weiehselhaum, of Corona, L. I., N. Y., for bankrupt.
    Weinberg & Weinberg, of New York City, for objecting creditor George I. Branower.
   BYERS, District Judge.

Motion to confirm report of referee granting discharge.

A reading of the testimony and examination of the exhibits creates the impression that the objecting creditor has produced evidence sufficient to place upon the bankrupt the burden of proving that he has not committed an act which would prevent his discharge.

Specification 2 refers to an allegedly fictitious mortgage purporting to have been given to secure loans aggregating $8,500.09. If the mortgage had no valid inception, the oath to the schedules was false, and the discharge would be denied. Section 14 of Bankruptcy Act as amended by act May 27, 1926 (11 USCA § 32). The proviso in clause 7 of subdivision b of that section (11 USCA § 32 (b) (7), which has to do with the burden of proof, must be given attention. See Shanberg v. Saltzman (C. C. A.) 69 F.(2d) 262.

The bankrupt stated in writing, in his financial statement of April 14, 1931 (Exhibit 1) that his Lynbrook property was free and clear. He stated before the referee that the mortgage for $8',500.00 was executed and delivered on October 7, 1930, over six months prior to the date of the financial statement. One of those two statements was false.

That was the bearing upon the issues, of the exhibit in question. For the purpose of testing the bankrupt’s evidence, it was properly admitted by the referee.

When the financial statement was made, if it was untrue, the bankrupt was discredited as a witness before the referee. If it was true, his testimony concerning the inception of the mortgage was untrue.

The very nature of the alleged loans, according to what was said by the bankrupt and the mortgagee, was sufficient to excite scepticism and to suggest diligent inquiry. The testimony of the bankrupt as to his methods in purchasing stock of the American Telephone & Telegraph Co. was so opposed to common knowledge as to anything but the exercise of rights, as to discredit his entire version of the matter.

It is difficult to believe that neither the bankrupt nor the alleged mortgagee has any record whatever of a series of alleged loans, covering a period of years, and aggregating $8,500.00. The mortgagee’s reluctance to explain why he kept $4,000.00'in cash in his home, while he was maintaining a bank account and was engaged in business, ought to have suggested misgivings concerning acceptance of the testimony without some element of corroboration.

Specification 3 has to do with a $500.00 alleged loan, also in cash, as to which there is apparently no record or memorandum whatever, and the giving thereafter of a chattel mprtgage on the bankrupt’s automobile by way of security.

There is nothing to discredit this transaction except the same failure to produce any evidence whatever that the loan was made, and that the proceeds were received by the bankrupt.

The matter will be sent back to the referee to take additional proof from the bankrupt, tending to sustain the good faith of each alleged loan, upon the theory that the bankrupt’s conflicting statements concerning the $8,500.00 mortgage have so discredited him as to put upon him the burden of proof as to the matters involved in these two specifications.

Settle order.


author: GREEN, Judge.

text:
    AMERICAN FOOD PRODUCTS CO. v. UNITED STATES.
    No. L-126.
    Court of Claims.
    May 7, 1934.

      I. N. Nelson, of Chicago, Ill., for plaintiff.
    John A. Bees, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
    Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
   GREEN, Judge.

The plaintiff is a corporation formerly styled Morris & Co., which filed a consolidated corporation income and excess-profits tax return for itself and its subsidiaries covering the year 1917. This tax was duly paid, including a tax for one of its subsidiaries called the William F. Mosser Company. Subsequently the Commissioner assessed a large amount of additional tax, and the plaintiff filed an amended return showing a lesser amount due than that which was originally reported. At the same time the plaintiff and its affiliates filed a claim for refund of the difference between the amount shown to be due by its amended return and the amount paid, and also filed a claim for abatement of the additional assessment. Later the Commissioner made an audit and determined that there had been an overassessment in a sum that largely exceeded the additional assessment (which had not been paid), and at the same time the Commissioner determined that the William F. Mosser Company had a tax liability for the year 1917 in the sum of $44,-661.17, which was subsequently assessed and demand made of the taxpayer for payment. In due course and in the ordinary manner the Commissioner approved a schedule of over-assessments against the plaintiff, which he sent to the collector. The schedule was returned by the collector on April 30, 1924, showing that in compliance with instructions appearing thereon, of the total overassessment in favor of plaintiff, $438,375.57 had been abated and the balance of $44,659.23 credited in satisfaction of the additional assessment against the William F. Mosser Company for 1917. On June 2, 1924, the Commissioner mailed to the plaintiff a certificate of overassessment in the amount of $483,-034.80 for 1917.

The plaintiff now brings this suit to recover the $44,659.23 credited on the additional assessment against the Mosser Company after the period of limitations on the collection thereof had expired. The suit is not brought on any claim for refund, but it is contended that the certificate of overassossment constituted an account stated in favor of plaintiff upon which the suit is based.

The record presents two questions for our determination:

First, whether the credit upon the taxes of the Mosser Company was made pursuant to directions given by the plaintiff;

Second, whether there was in fact any account stated in favor of plaintiff, for, if not, its suit is clearly barred by the statute of limitations.

On the question of whether the Commissioner followed instructions in making the credit both parties rely upon the letter of February 24, 1923, written by plaintiff's predecessor, Morris & Co., and set out in the findings. If the letter is taken literally the plaintiff’s contention that it gave no directions as to the credit would have to be sustained for it merely states that the plaintiff may be assessed with any taxes that are due and that any over assessment (meaning thereby overpayment) shall be refunded to Moi’ris & Co. This, of course, could be done without any agreement, for it would be merely the ordinary proceedings as provided by law. But the letter also stated that this was in confirmation of an agreement made between the representatives of the company and the defendant. Apparently there had been a conference with reference to the adjustment of the taxes of the parent corporation and its subsidiaries and an agreement had been reached thereon, which the letter confirmed. Unless this was the understanding, the agreement was meaningless. The plaintiff insists that the letter of the Commissioner dated November 8, 1923, shows that the Commissioner refused to acquiesce in the request made by Morris & Co. for the reason that such action would complicate the adjustments of the tax liability .in the various districts in which Morris & Co. operated. But the Commissioner did direct the collector of internal revenue for the first district of Illinois to comply with the request and in order that it might be done had the collector for the district of Massachusetts transfer the assessment of the Mosser Company to Illinois in order that the allocation could be made. The record also shows that after this had been done the Commissioner notified Morris & Co. of his determination of the correct net income and tax liability for the year 1917. The letter recited that an examination had been made of the income tax returns of Morris & Co. and the affiliated companies for the year 1917, and that the results thereof were outlined in attached statements and schedules. This was followed by a statement as follows: “Inasmuch as all differences have been adjusted between yourself and the Unit the certificate of overassessment for the amount ($483,034.80) shown will be forwarded immediately for scheduling.”

Not long thereafter further proceedings were had in the way of scheduling the over-assessment and making the credit upon the tax of the Mosser Company as hereinabove recited. We think that taking the evidence as a’ whole it shows that the defendant in effect was complying with the instructions of Morris & Co. as it had a right to understand them. If we are correct in this, then under decisions of this court and the Supreme Court recently made, the plaintiff cannot recover.

It should also be observed that the record fails to show that the Mosser Company ever filed any return for 1917. The assessment made against this company yas therefore made in time.

It is not necessary, however, to rest the case upon our conclusions stated above for in any event it is clear that the plaintiff’s action is barred by the statute of limitations.

As before stated, the plaintiff relies on the certificate of overassessment which it is insisted constituted an account stated in its favor upon which suit could be brought at any time within six years. For some reason which is not given, the certificate of overassessment which was sent to plaintiff was not offered in evidence, nor is there anything in the testimony to show the contents of this instrument. The record contains merely the bare recital that a certificate of overassessment in the sum of $483,034.80 was mailed to plaintiff. If we assume that the Bureau followed its regular course in making out this instrument, it would show that of this sum, $438,375.57 was abated, the balance of $44,-659.23 credited upon the taxes of the Mosser Company, and that nothing was due plaintiff and its ease must fail. If, on the other hand, notwithstanding our knowledge of the Bureau practice, we can indulge in no presumptions or assumptions with reference to what was stated in the instrument under consideration except that it showed an overassessment in the amount above stated, there is still no foundation for plaintiff’s ease. An overassessment is not the same thing as an overpayment, and a certificate of overassessment is often made when there has been no overpayment. In the case before us, the fact is, as otherwise shown by the record, that of the overassessment of $483,034.80, $438,375.57 was not an overpayment. It had been assessed but had been abated without any payment thereof. In many of the cases which we have recently had before us we have referred to the certificate of overassessment which was issued as showing an overpayment but this was because the body of the instrument and the language contained therein showed that there had been in fact an overpayment and the amount thereof. If the certificate sent to plaintiff merely showed an overassessment and nothing more, it did not thereby show an overpayment or that anything was due plaintiff. The overpayment was shown by the schedule signed by the Commissioner at an earlier date, but this was not delivered to the plaintiff. Moreover, the schedule as a whole showed nothing was due the plaintiff. To constitute an account stated the account must he rendered by one party to another and show a balance struck and the amount due, if any. There is no evidence to this effect in the record, and plaintiff’s cause of aetion is consequently barred.


author: BREWSTER, District Judge.

text:
    O’BRIEN v. CARNEY et al.
    No. 3975.
    District Court, D. Massachusetts.
    April 25, 1934.
    Hermanson & Silverman and Philip Phil-bin, all of Boston, Mass., for plaintiff.
    John T. MeMorrow, of Boston, Mass., for defendant J. P. O’Connell Co.
    Francis J. W. Ford, U. S. Atty., John A. Canavan, Asst. U. S. Atty., both of Boston, Mass., for defendants Carney, Philbrock, Fitzgerald and Morse.
   BREWSTER, District Judge.

This is a motion to dismiss a bill of complaint brought against several respondents charged with the duty of administering the Federal Emergency! Itelief Administration and the J. P. O’Connell Company, a corporation.

The motion to dismiss being in the nature of a demurrer, the right of the complainant to the relief prayed for must appear from the allegations of facts set forth in the bill of complaint.

It is alleged that the respondents connected with the Federal Emergency Relief Administration succeeded to the powers and liabilities of the State Civil Works Administration; that they are duly qualified officials of the United States government in the said FERA, which is a duly constituted instrumentality of the government of the United States for the relief of unemployment and distress; that these respondents advertised for bids for 5,200 yards of mixed concrete to be delivered to the work in Cambridge, Mass.; that the complainant submitted the lowest bid; that he was capable of completing and performing his contract; that after unnecessary delay the complainant’s bid was rejected and the bid of the respondent O’Connell Company accepted; that the complainant has duly demanded of the respondents that the contract be awarded to him, which demand has been refused; that the respondent O’Connell Company is ready to deliver said concrete and, if it is allowed to do so, the complainant will suffer irreparable damage “to his rights as a citizen and taxpayer.”

From the copy of the invitation for bids annexed to the bill of complaint, it appears that the government reserved the right “to reject any and all bids.”

The complainant prays for injunctive relief restraining the respondents from taking any action whatever in furtherance or fulfillment of the contract awarded to the O’Connell Company.

There is also a prayer for injunctive relief against the superintendent of streets of Cambridge who is not made a party to the bill. This prayer, of course, must be denied.

We are met at the threshold of this controversy with the question whether the complainant has any standing to ask a court of equity to interfere with the performance of a contract between the FERA and the O’Connell Company, assuming that the contract was improperly awarded. His status as a taxpayer or citizen gives him no right to the relief which he seeks. The doctrine which sometimes allows a taxpayer to enjoin the wrongful expenditure of money by a municipality has no application in suits to enjoin agencies of a state or federal government. Pomeroy, Equity Jurisdiction (1905) page 580; Jones v. Reed, 3 Wash. 57, 27 P. 1067; Hutchinson v. Skinner, 21 Misc. 729, 49 N. Y. S. 360; Gibbs v. Green, 54 Miss. 592; Tacoma v. Bridges, 25 Wash. 221, 65 P. 186; Board of Commissioners of Barber County v. Smith, 48 Kan. 331, 29 P. 565.

If there has been a breach of a public duty by a state officer, a taxpayer has no standing to enjoin the officer without showing that he will suffer peculiar injury not suffered by the public at large. Tacoma v. Bridges, supra; Board of Commissioners of Barber County v. Smith, supra.

The same rule must a fortiori apply to federal officers.

The next question is whether the lowest unsuccessful bidder has any such rights as will entitle him to prevent the execution of the contract, conceding it was not awarded in accordance with law. There was no contractual relation between the complainant and the administration because his offer had never been accepted. If the complainant can assert any rights to the award which this court can recognize, they, I take it, must spring from some federal statute. I do not find any statute which in express terms confers any such right upon a low bidder whose bid has been rejected. Rev. St. § 3709, 41 U. S. C. § 5 (41 USCA § 5), requires that purchases and contracts for supplies in any department of government shall be made by due advertising for proposals except when the public exigencies require immediate delivery. It must follow as a necessary corollary that this act imposes a duty upon the department to accept the proposal most advanta/geous to the government; otherwise the statute would be meaningless. It has been so held. Scott v. United States, 44 Ct. Cl. 524. It should be observed, however, that according to the Scott Case the duty is to accept the lowest responsible bid. This result is also both necessary and logical. It would not be to the advantage of the government to compel the acceptance of a low bid proposed by one who was unable to perform. Rev. St. § 3709 (41 USCA § 5) was enacted for the benefit of the United States and not for the bidder. American Smelting & Refining Co. v. United States, 259 U. S. 75, 42 S. Ct. 420, 66 L. Ed. 833; United States v. New York & Porto Rico Steamship Co., 239 U. S. 88, 36 S. Ct. 41, 60 L. Ed. 161; Colorado Paving Co. v. Murphy (C. C. A.) 78 F. 28, 31, 37 L. R. A. 630.

The last-cited ease denies to an unsuccessful bidder, even though submitting the lowest bid, any rights to equitable relief. In the opinion it is stated:

“It is now settled by the great weight of authority that the lowest bidder cannot compel the issue of a writ of mandamus to force the officers of a municipality to enter into a contract with him. * * * And the courts hold that he cannot maintain an action at law for damages for their - refusal to enter into the contract. * * * This principle is.as fatal to a suit in equity as to an action at law. It goes not to defeat any particular cause of action, but to defeat the right to any relief.”

The necessity of selecting a responsible bidder imports into the ministerial act an element of discretion to determine whether the lowest bidder is qualified to carry out his contract. I agree with the suggestion of the United States attorney that the “term 'responsible’ means something more than pecuniary ability; it includes also judgment, skill, ability, capacity and integrity.” Williams v. Topeka, 85 Kan. 857, 118 P. 864, 38 L. R. A. (N. S.) 672, Ann. Cas. 1913A, 497; 36 Cyc. 875, 876.

The exercise of this discretion is not subject to review by the judicial branch of the government. In State of Mississippi v. Johnson, 4 Wall. 475, 498, 18 L. Ed. 437, Chief Justice Chase observes that “a ministerial duty, the performance of which may, in proper cases, be required of the head of a department, by judicial process, is one in respect to which nothing is left to discretion.” This doctrine has been recognized in other eases. Decatur, Ill. C. R. Co. v. Paulding, 14 Pet. 497, 10 L. Ed. 559, 609; Louisiana v. Jumel, 107 U. S. 711, 2 S. Ct. 128, 27 L. Ed. 448; Cunningham v. Macon, etc., Co., 109 U. S. 446, 3 S. Ct. 292, 609, 27 L. Ed. 992; United States v. Black, Com’r, 128 U. S. 40, 9 S. Ct. 12, 32 L. Ed. 354; Plested v. Abbey, 228 U. S. 51, 33 S. Ct. 503, 57 L. Ed. 724; Louisiana v. McAdoo, 234 U. S. 627, 34 S. Ct. 938, 58 L. Ed. 1506; United States ex rel. Riverside Oil Co. v. Hitchcock, 190 U. S. 316, 23 S. Ct. 698, 47 L. Ed. 1074.

Roberts, Treas., v. United States, 176 U. S. 221, 20 S. Ct. 376, 44 L. Ed. 443, and Smith v. Jackson, 246 U. S. 388, 38 S. Ct. 353, 62 L. Ed. 788, cited by the complainant, were eases where the court found that the ministerial act involved was one involving no discretion in the administrative officer.

The complainant lays stress upon the language found in a Manual of Financial Procedure, issued by the administrator of the Federal Civil Works Administration. In this Manual (section. VI, page 11, item 20) it is properly noted that the law creating the FERA makes no exception to the requirements of law and regulations governing purchase of supplies and services for government developments generally and then quotes from Rev. St. § 3709 (41 USCA § 5) which requires all purchases except in cases of emergency to be made after advertising.

In item 23, page 14, of the sime section, administrative agents are instructed to accept the lowest bid on a product which meets the specifications outlined in the proposal or invitation for bids. This item, however, presupposes that the necessity may sometimes arise for rejecting the lowest bid, since it prescribes a method of procedure to be adopted in that event.

The act creating the FERA (15 USCA §§ 721 — 728) did not confer in express terms any authority upon the administrator to issue regulations which would have the force of law. Whether the administrator is the bead of a department so as to come within the scope of 5 U. S. C. 22 (5 USCA § 22), which authorizes department heads to prescribe regulations, is a matter of serious doubt, but even if we should give the instructions promulgated by him the force of lawful regulations, the ministerial acts required under them would still be those in respect to which something is left to the discretion of the officers.

There are cases to be found in the rej)orts where the courts have afforded equitable relief when a public officer has arbitrarily and willfully refused to perform bis plain duty as such officer, but I have not met any case where the complaint related to the failure of an administrative officer to award a contract for the purchase of materials.

In passing upon the motion, I can only consider facts properly pleaded, and nothing is gained by the characterization of the acts of the respondents or their failure to act.

My conclusion is that on the authorities these ministerial acts of the respondents are not subject to judicial review, and this court is powerless to afford relief. Williams v. Topeka, supra.

The motion to dismiss the bill of complaint is allowed and the hill is dismissed.

O’Brien also filed a petition for a writ of mandamus. Counsel conceded that the court was without jurisdiction to issue the writ unless in aid of the bill of complaint. Inasmuch as the bill of complaint is dismissed, it would follow that the petition for writ is to be denied.


author: NIEHDS, District Judge.

text:
    UNIVERSAL OIL PRODUCTS CO. v. WINKLER-KOCH ENGINEERING CO. et al.
    Nos. 716, 895.
    District Court, D. Delaware.
    April 27, 1934.

      Thomas G. Haight, of Jersey City, N. J., Charles M. Thomas (of Bacon & Thomas) and William E. Hall, both of Washington, D. C., and Hugh M. Morris, of Wilmington, Del., for plaintiff.
    Arthur C. Denison (of Baker, Hostetler, Sidlo & Patterson), of Cleveland, Ohio, and J. Bernhard Thiess, Robert Lewis Ames, and Thorley von Holst (of Jones, Addington, Ames & Seibold), all of Chicago, 111., and Arthur G. Logan, of Wilmington, Del., for defendant.
   NIEHDS, District Judge.

This suit charges defendants with infringement of two process patents for the production of gasoline by cracking cheap petroleum oil. Patent No. 1,392,629' was granted in 1921 to Carbon Petroleum Dubbs and thereupon assigned to the plaintiff. The other patent, No. 1,537,593, was granted in 1925 to the plaintiff upon an application filed in 1920 by Gustav Egloff. All claims of both patents are in suit except claim 6 of the Dubbs patent. ■

The defenses are noninfringement and invalidity. Stated more specifically, the defense of invalidity is: The Dubbs patent is invalid for lack of disclosure, the Egloff patent is invalid for lack of utility, and both patents are invalid for lack of patentable novelty over the prior art.

Por a number of years plaintiff has been engaged in promoting the use by refiners, in this country and abroad, of the “Dubbs process” for cracking heavy petroleum oils for the production of gasoline. It owns a number of patents, including the two patents in suit, although many of them are not practiced in the Dubbs process. That process is bottomed upon the Dubbs patent in suit. In the decade before 1931 plaintiff received in royalties under licenses of the Dubbs process $33,500,000'. Root Refining Company, hereinafter referred to as defendant, is engaged in the business of refining petroleum at Eldorado, Ark. The other defendant was never-served with process.

In the early days of refining crude petroleum, gasoline was obtained by distillation. The operation consisted in gradually increasing the temperature of the oil and driving off a part in the form of vapor. The vapors were then condensed and a separation effected by directing the condensate of one volatility into' one vessel, and a portion of a lower volatility into another vessel and so on. This operation was essentially a nonchemical one.

The use of combustion engines in motor vehicles created a great demand for gasoline. That demand would have exhausted the available petroleum deposits within the span of a life unless a large additional supply of gasoline could be obtained. Chemists for several generations had studied the production of gasoline by cracking. “Cracking” is the decomposition of petroleum by heat and pressure, with the consequent breaking up of the molecules and the production of both lighter and heavier hydrocarbons. Gasoline is a lighter hydrocarbon produced by this chemical action. Many patents had issued for processes and apparatus! to crack petroleum. The first commercially successful process of cracking to produce gasoline was invented by Dr. Burton and used by the Standard Oil Company of Indiana in 1913. Shortly after the advent of the Burton process, it was improved by the invention of Clark.

At the time plaintiff entered the field with the Dubbs process, the most effective process in commercial use for producing gasoline by cracking was the Burton-Clark process. The features characterizing this process were: (1) Raising the oil to the cracking temperar ture by passing it through tubes located in a furnace. (2) Receiving the discharge in an unheated but insulated chamber where the vapors liberate themselves from the liquid and pass overhead to a condenser. (3) A condensing action whereby the heavier vapors are liquefied into a reflux condensate and the passing of the vapors which are not condensed to a final condenser. (4)- Passing of the liquid from the final condenser to a receiver. (5) Returning the reflux condensate and the fresh charge to the heating tubes. (6) The maintenance of a pressure of approximately 95 pounds per square inch.

The Burton-Clark process is a liquid-vapor phase process. There is always a very substantial quantity of liquid in the heating zone. In this process, as well as in earlier processes, the accumulation of carbon upon the heating tubes or chambers of the still was rapid and required the shutting down of the still after it had been “on stream” for a very short‘period. The carbon formed on the inner surfaces of the heating tubes and the heat became localized in the tubes and increased the temperature thereof to a point where their tensile strength was insufficient to withstand the high pressure. The appearance of red spots was a danger signal, and the still was shut down, the contents discharged and the parts thoroughly cleaned before an attempt was made to bring the still again “on stream.” Moreover, these stills were confined to the cracking of light oils. The cracking of crude oil would have been out of the question. The normal operating - cycle of the Burton-Clark still was 72 hours, of which 36 hours was the “on stream” period and the balance of the cycle was used in cleaning the still and bringing it “on stream.” The monthly output was about 4,000 barrels, with a gasoline yield of from 30 to 33 per cent.

In 1919 the Dubbs process embodying the invention of the Dubbs patent in suit was given an experimental demonstration at Independence, Kan., by the plaintiff. Dubbs was in charge of the work. In February of that year the operation was witnessed by Daniel Pyzel in charge of the Royal Dutch Shell group of refineries. The following month Dubbs applied for his patent. In December of that year Pyzel obtained a license for his companies from plaintiff. Pyzel testified that the so-called “clean circulation” of the Dubbs patent was the primary object in obtaining the license. Prior to this demonstration the Dutch Shell group operated under the Trumble patents. After seeing the Dubbs operation, Pyzel testified his companies had been proceeding on the “wrong track,” because in the Trumble process a very substantial part of the dirty residuum was returned to the heating coil.

In the summer of 1919 the operation of the Dubbs still at Independence was witnessed by 21 refinery representatives. These observers were familiar with the Burton and Burton-Clark type of still. The “on stream” period of the Dubbs still in this demonstration was 800 per cent, longer than it had been possible to obtain in any other gasoline cracking process. The explanation of the length of the run was the employment of the “clean circulation” feature of the Dubbs process.

The Standard Oil Company of California also recognized the superiority of this process. It had used the Burton and Burton-Clark types of still for cracking the heavy California oils, but found them unsatisfactory. That company maintained a development department of 200 men at a yearly cost of a million dollars in a vain effort to develop a successful cracking process. It sent one of its engineers to a plant of the Shell Company to observe the operation of a Dubbs unit. Upon receiving the report of the engineer, Hanna, vice president of the California Company, wrote to his superior officers, inter alia:

“In studying over these reports, it would seem to me that we have picked up the following :

“First: Cleanliness is next to godliness. e e a

“Sixth: That if the maximum degree of cleanliness is maintained, higher furnace efficiency can be attained.”

In 1925, the California Company obtained a license from the plaintiff and installed 15 Dubbs plants in California. For the oil processed to June 30, 1930, it paid to the plaintiff royalties in excess of $2,300,-000.

The apparatus disclosed in the Dubbs patent comprises five important parts: (1) Tubes called “cracking tubes” in a furnace through which a mixture of fresh charging stock and reflux condensate is continuously flowing as a stream with enough liquid oil to wash the tubes and prevent the deposit of carbon. Here the oil is raised to the maximum temperature in the process and is cracked to a considerable extent. (2) An insulated and unheated chamber, or chamber heated only enough to offset heat radiation, wherein the vapors separate from the liquid ■oil and pass up and out to a partial condenser. From the bottom of this chamber the liquid residue is discharged from the system. (3) A settling chamber or dephlegmator where the lighter fractions of vapor pass on to the final condenser and the heavier fractions are condensed and return as a condensate to the cracking tubes. (4) A final condenser. (5) A high pressure pump forcing fresh charging stock into the cracking tubes.

The process disclosed in the Dubbs patent is characterized by the following features: (1) The passage of oil in a stream through cracking tubes where its temperature is raised to the maximum and cracking occurs without substantial separation of the generated vapors from the liquid. The vapors generated in the cracking tubes are homogeneously disbursed in the liquid oil and pass with the liquid as a stream through the tubes whereby carbon deposits are prevented. (2) The discharge of the heated stream from the cracking tubes into the separating chamber where cracking is continued and the vapors free themselves from the liquid and pass up and out of the top. (3) Subjecting the vapors from the separating chamber to condensation in a dephlegmator. The lighter vapors pass on to another condenser and are finally drawn off as gasoline. The heavier fractions are returned as a clean condensate to the cracking tubes. (4) Continuously withdrawing this condensate, "called “reflux,” and mixing it with a fresh charge of oil. (5) Withdrawing permanently from the system the residue accumulating in the separating chamber. (6) Imposing the pressure of self-generated vapors on the oil undergoing treatment.

A comparison of the Dubbs process with the Burton-Clark process shows: (1) In the Burton-Clark process' widely used before Dubbs, the residue accumulating in the separating chamber was recirculated through the cracking tubes. In Dubbs this recirculation does not occur. (2) In the Burton-Clark process the reflux condensate was returned to the cracking tubes through the separating chamber and therefore became contaminated with the residue. (3) The Burton-Clark process is a semibatch process, whereas the Dubbs process is a continuous one. With these differences there are striking consequences. Burton-Clark required a special ■cracking stock, whereas Dubbs handles any petroleum oil. Burton-Clark had an “on stream” period of approximately 36 hours, whereas Dubbs has an “on stream” period many hundred per cent, longer. The gasoline yield of Burton-Clark was from 30 to 33 per cent., whereas the Dubbs yield is approximately 50 per cent.

The Egloff process was designed to further mitigate the carbon evil in connection with the cracking of heavy oils. This process utilizes the salient features of the Dubbs patent. It provides a preliminary screening action for removing from the system the free carbon and heavy polymers which rapidly snowball to coke. The apparatus includes a separating chamber with a residue draw-off followed by a partial condenser, final condenser, and receiver. With these features two heating coils are associated in separate furnace chambers so that different heat and pressure conditions may be obtained. The fresh feed is pumped through the low temperature coil and its temperature is raised to effect a very mild cracking. The oil 'discharges into the vaporizing chamber and the vapors pass to the dephlegmator. The condensate in the dephlegmator is pumped through the high temperature coil and mixed with the reflux condensate from the other coil. There is an intermingling of two oil streams on their way to the vaporizing chamber. In this process there are two charging stocks: one, the fresh oil which is pumped into the low temperature coil, and the other, a charge formed by the partial condensing of the vapors from the first charge.

The charge of infringement involves a consideration of the claims of the Dubbs patent of which claim 1 may be taken as "typical. This claim reads as follows: “1. A process of converting relatively heavy into lighter hydrocarbons, consisting in passing a stream of oil through a zone where the oil is heated to a cracking temperature but without substantial vaporization, passed thence to and through a zone where vaporization takes place, removing the vapors, subjecting them to reflux condensation, returning reflux condensate for further cracking, • removing the residue, after said vaporization, from the system without permitting intermingling of any substantial portion thereof with the oil in the heating zone and maintaining a pressure upon the material during distillation.” The language of the claim is plain and simple. There can be no controversy about the subject-matter of the grant of the patent and of the limits thereof with the possible exeeption of the negative limitation in reference to “vaporization” in the cracking tubes. This limitation is defined by the expression, “but without substantial vaporization,” in lines 5 and 6 of claim 1.

The whole defense of noninfringement hangs upon the construction and interpretation of the words “without substantial vaporization” in the cracking tubes. Defendant states this “is a matter of vital and, so .far as infringement goes, controlling importance.” Defendant holds that “vaporization” in the claims of the patent is synonymous with cracking. It stakes its whole defense of noninfringement upon this position. It contends the Dubbs patent excludes substantial cracking in the cracking tubes, whereas defendant’s process involves substantial cracking in the cracking tubes.

“Vaporization,” in the phrase “without substantial vaporization” in claim 1 of the Dubbs patent and in the equivalent phrases of the other claims, does not mean cracking. This conclusion follows from a consideration of the patent and of the pertinent evidence. In the specification of his patent, Duhbs says: “B are the cracking tubes. C are the vaporizing tubes.” From these terms one would naturally conclude that Dubbs designed a process with substantial cracking in the cracking tubes. The primary function of the C tubes is to separate .the vapor from the liquid. One would also naturally conclude that Dubbs had this separation primarily in mind when he called C tubes “vaporizing tubes.” A patent, like any grant, should be interpreted as a whole and, as near as may be, a consistent whole. On page 1 of the specification, lines 75 to 83, inclusive, Dubbs states that the reflux and fresh charge are discharged “through tubes B and during the time they are passing through said tubes, they are subjected to sufficient heat to cause the desired amount of cracking. Said oil is then passed into the tubes C which are only partially filled with the oil and as the oil passes through these tubes, there is a liberation of vapors from same and which vapors pass up,” etc. Moreover in the illustrative run given in the specification of the patent on page 2, lines 38 to 43, inclusive, Dubbs states: “Thence to the 4 inch coils B which are subjected to a temperature of 750° to 860° F. The heated oil then passes to the 10 inch coils which are maintained 'about half full of oil and wherein vaporization takes place.” This range of heat in the cracking tubes is cracking temperature and at the stated pressure would inevitably result in cracking. Again, in claim 5, the second step of the Dubbs process is defined 'as “affording a vaporization space above the stream during the second stage of the travel thereof.” Vaporization here cannot mean cracking as a cracking space above the stream would be meaningless. A “vaporization space” means a space for liberation of vapor. The words in the claim immediately preceding the words quoted are “while preventing substantial vaporization.” “Vaporization” used in successive lines undoubtedly connotes the same meaning.

Dr. Lewis testified in detail concerning the action in the cracking tubes B in the practice of the process of the Duhbs patent. He is professor of chemical engineering in the Massachusetts Institute of Technology and a consulting engineer who, for the last twelve years, has co-operated with the technical staffs of various refineries in studying their problems. Dr. Lewis testified:

“Q. 113. As to the cracking which takes place, where does that occur in this set-up? A. It occurs both in the cracking tubes B, where the heat is supplied, and in the vaporizing tubes C, where no heat is supplied, but cracking continues because of the high temperature obtaining in that zone.

“Q. 114. Will you set forth in more detail the action which occurs in the cracking tubes B in the practice of this process of the Dubbs patent in suit? A. Bemembering that the cracking tubes B are the first part of the apparatus which I described, as disclosed in the patent and drawings for the carrying on the process, the process provides that these tubes shall be fed with a mixed liquid feed, consisting in part of fresh feed to the process, and in part of reflux condensate produced in the dophlegmator under pressure and returned to the cracking tubes.

“In the second place, it provides that this reflux shall be substantially free from carbon. In other words, it provides that the feed to these cracking tubes shall he a clean stock.

“In the third place, it provides that throughout these tubes an adequate amount of liquid shall be maintained, an amount adequate to prevent any substantial carbon formation or deposition in these tubes.

“In the .fourth place, it provides that there shall be no liberation of vapors in those tubes; that any vapors generated in these tubes shall travel through these tubes, commingled with the liquid in them in the form of a froth or a spray or intimate mixture without any separation or segregation or lib-«ration of the vapors from the liquid; and finally, it provides that' the heat shall be supplied to the system in these tubes, and therefore, that the maximum temperature realized anywhere in the system, shall be attained in these tubes. * * *

“Q. 145. Doctor, is it proper to say that there is no substantial vaporization in the tubes B of the Dubbs patent in suit in practicing the process of that patent? 'A. Yes, in my opinion.

“Q. 146. Would there in those tubes be vapor generation? A. Yes, a very considerable amount.

“Q. 147. Would there in those tubes be both vapor generation and vapor liberation? A. No, there would be vapor generation only.”

The phrase “without substantial vaporization” was manifestly intended to -exclude the familiar vapor phase cracldng. In this phase, vapors travel through the cracking tube at a speed appropriate to vapors and independent of any liquid. This phase) would be baneful rather than beneficial. The Dubbs process contemplates a stream of liquid filled with generated vapors washing through B tubes, thereby preventing the deposit of carbon. Surely if Dubbs or his solicitor intended vaporization to mean cracking, why did they not say without substantial cracking in the cracking tubes. The word “cracking” appears perhaps 100 times in the patent, and if they meant “cracking” they would have 'said “cracking.”

Claim 5 of the Egloff patent is typical and reads as follows: “5. A process of oil conversion, consisting in maintaining a 'body of heated hydrocarbons in an enlarged zone where substantial vaporization occurs, in subjecting the vapors to reflux condensation to condense the heavier vapors, in passing the reflux condensate in an advancing stream through a heating zone where it is subjected to cracking conditions of temperature and pressure, in delivering heated condensate to said enlarged zone, and simultaneously heating an independent stream of charging oil for delivery to said enlarged zone to a temperature sufficient to cause a substantial vaporization thereof in said zone, in introducing said heated charging oil to the enlarged zone, and in withdrawing unvaporized oil from said enlarged zone without permitting the same to again enter either of said oil streams.”

The claims of the Egloff patent are concerned with two heating coils and a separating chamber for both. The initial fresh charge is heated at an appropriate temperature and pressure. There is then a separation of the vapors from the liquid oil. The vapors are subjected to partial condensation and the condensate is used as a charge for the other heating coil operating under higher temperature and pressure. Cracking in the liquid-vapor phase is accomplished. Vapor from the second coil is separated in the separating chamber. There is partial and final condensation of the separated vapors. The residue in the separating chamber from the oil from the high temperature coil and from the low temperature coil is discharged from the system. It is apparent that the salient features of the Dubbs process are employed by Egloff.

Defendant is charged in this suit with using at its plant at Eldorado, Ark., a process for cracking petroleum oil to produce gasoline in a cracking unit furnished by the Winkler-Koeh Engineering Company. The unit was installed in 1928 and began operations in 1929. Koch of the Winkler-Koeh Engineering Company testified on behalf of defendant. Winkler did not testify. He had been employed by plaintiff from May, 1921, until April, 1925, in a position enabling him to become thoroughly familiar with the Dubbs process. In 1927 Perdew also of the Engineering Company wrote to the president of plaintiff that “all three of us” are “post graduates of Universal.” Afterwards a second Dubbs unit was installed by defendant and put into operation. Defendant entered into a license with plaintiff for the use of the Dubbs process providing for the payment of royalties at the rate of 15 cents per barrel of oil processed. The royalties paid by defendant to plaintiff until November, 1930, totaled approximately $350,000.

October 5, 1926, defendant wrote plaintiff, inter alia: “During the last ten days of September our thru-put was at the rate of 1200 barrels daily or 18,000 per unit per month. Our yield of pressure distillate in accordance with figures submitted me was 67% of the charging stock and while all of this pressure distillate has not been re-run, our average has been 78% gasoline from pressure distillate, which indicates a total percentage of gasoline based on charging stock of in excess of 52%. This figure is after all treating, re-run and evaporation losses have been considered.”

The Winkler-Koeh apparatus used by defendant comprised a tall vaporization chamber, 28'x8½'; with a residue draw-off line at tlie bottom and a partial condenser of the bubble tower type to receive the vapor from the vaporizing chamber. Prom the top of the bubble tower there is a vapor line leading to a final condenser. With these chambers two heating units are associated. The first heating unit consists of coils in a furnace through whieh the fresh charge passes and is discharged with the reflux condensate into the vaporizing chamber. Tbe second heating unit consists of sets of tubes four of them heated by convection and the remaining sets by radiant heat. The last sets serve as soaking sections.

In defendant’s process crude petroleum is forced through the coils of the low temperature furnace. It is then discharged into a vaporizing chamber. Here the generated vapors separate themselves from the liquid and pass to the bubble tower, where the vapors not condensed pass on to a final condenser. The condensate is pumped from the bubble tower to tbe second heating chamber where it is cracked. The material from the first and second units then pass into the vaporizing chamber. In the vaporizer there is a body of oil predominantly in liquid phase in state of ebullition approximately 10' deep. The vapors free themselves and pass upwardly through the space of approximately 18' into the bubble tower. There is a constant draw-off of the residue from the bottom of the vaporizing chamber which never returns to the system. The reflux condensate is returned to the high temperature high pressure unit Tincontaminatfed. by residue. In the traveling of the oil through the soaking section considerable generation of vapor occurs but there is no liberation of the vapor from the oil until it reaches the vaporizing chamber.

After fully discussing defendant’s procedure Dr. Lewis testified: “It seems to me that the process of defendant is certainly a substantial equivalent of the Dubbs process. The differences that do exist are modifications that do not affect the principle and the process as Dubbs disclosed them, in my opinion.”

Also Dr. Lewis testified: “The process as practiced by defendant, certainly, it seems to me in the light of all this information with regard to the prior art, is in every essential respect identical with the process as described by Egloff.”

There is no evidence in this ease of any commercial prior art except the Burton process and a few variants thereof and the Burton-Clark process already considered. The prior art relied upon by the defendant as being in anticipation of or in limitation of the patents in suit are the patents of Hall, Green-street, Alexander, Trumble, and Pielstieker, of whieh the first three are paper patents. Cracking processes are divided into (1) vapor phase, (2) liquid phase, and (3) vapor-liquid phase. It may he stated broadly that the vapor phase process was a failure because of the deposit of carbon in the eraeking zone.

The Hall patent describes a vapor phase process. The oil is cracked in vapor form and discharged directly into a condenser without any vaporizing chamber. The reflux does not reten directly to the cracking tubes. It returns indirectly in contaminated form.

The Greenstreet patent also discloses a vapor phase eraeking process. The material subjected to a cracking temperature in one of the eraeking coils includes the combined residue ó£ a series of cracking operations to whieh the vapors are subjected. The cracking digesters load the reflux with carbon and prevent clean circulation.

The Alexander patent discloses another vapor phase process. It failed although an effort was made to make it work under favorable conditions. Considerable carbon produced in the cracking operation is carried back with the reflux to the cracking tubes.

The Pielstieker patent belongs to the last century. Although it had always been available, no one used it. There is uncertainty as to what it discloses. For obtaining light oils by eraeking, Pielstieker discloses a coil without a vaporizing chamber or reflux condenser. He also discloses a heating coil and shell with a plurality of baffles and a dome. Defendant asserts that eraeking occurs in the first coil, vapor separation in the shell, the dome is a reflux condenser, and the reflux may be returned to the coil for reeraeking. This part of the system, however, was intended for distillation. The dome is an entrainment knockout common in distillation. If the shell was intended for a vapor separator it should be heated to a temperature like the coil and have substantial pressure. No one used it because it was useless.

The Trumble patent discloses the return of a large part of the residue of the vapor separating step to the heating zone and the return of the reflux through the dephlegmator with the resulting contamination. Trumble returned dirty and Dubbs clean reflux for cracking. There is the difference.

These patents do not seriously challenge the validity of the Dubbs patent. A consideration of the prior art resolves itself into the question whether Dubbs discloses patentable novelty over Trumble and Burton-Clark. As we have seen, the continuous process of Dubbs was a great advance over the dirty reflux of Trumble and over the semi-batch process of Burton-Clark. In the prior art the reflux was always contaminated by the residuum on reaching the cracking tubes. The clean circulation of Dubbs may have been due to the simple expedient of eliminating from the system all the residuum in the vaporizing chamber. Simple though the expedient was it was new and useful and revolutionized the cracking industry.

What are the applicable rules of law?

The Dubbs patent, having substantially advanced the industry to which it relates, is entitled to be construed liberally. In Eibel Process Co. v. Minnesota & Ontario Paper Co., 261 U. S. 45, 63, 43 S. Ct. 322, 328, 67 L. Ed. 523, the invention consisted only in a change in an old paper machine. When operated at a speed of 500' feet per minute the machine gave a defective product. By slightly changing the pitch of one of the parts of the machine, Eibel was enabled to produce a satisfactory product with the wire traveling at a speed of approximately 600 feet per minute. “In the ease before us, for the reasons we have already reviewed, we think,” said Chief Justice Taft, “that Eibel made a very useful discovery, which has substantially advanced the art. His was not a pioneer patent, creating a new art; but a patent which is only an improvement on an old machine may be very meritorious, and entitled to liberal treatment.” The above language was adopted by this court in Westco-Chippewa Pump Co. v. Delaware Electric & S. Co., 57 F.(2d) 55

In process patents the claims are not to be limited by the apparatus which may be disclosed for carrying out the process. In Moore Filter Co. v. Tonopah-Belmont Development Co., 201 F. 532, 541, the Court of Appeals for-this circuit said: “In considering the question of the infringement' of a process patent, it must be borne in mind that the monopoly secured by the claims is, generally speaking, a monopoly of the process, and the test of infringement is whether such process is utilized by the infringer. As the apparatus shown in a process patent is only to show that the process may be practically applied, it follows that such illustrative apparatus does not limit the process patentee to that type of machine alone. If that were the case, a process patent would be of little value. * * * It will therefore be evident that the test of process infringement is not the similarity of apparatus, but rather whether the apparatus, no matter what its form, utilizes the process.” In this suit there are differences between defendant’s apparatus and the apparatus disclosed in the patents but that is entirely immaterial since the apparatus of defendant carries out the principle of the two patents in suit.

In considering the claims of a patent, that construction should be adopted which will utilize and sustain rather than one which will destroy it. To adopt defendant’s contention as to the phrase “without substantial vaporization” would result in a finding that the claim is invalid. "Vaporization can connote the mere generation of vapors in a body of liquid. The adoption of this construction would result in a finding that the claims in suit are invalid because they involve a departure from the specification of the patent. On the other hand, vaporization may connote the generation of vapors in a body of liquid accompanied by the liberation or separation of the vapors from the liquid or may connote the mere liberation or separation of the vapors from the body of the liquid. The adoption of either of the latter constructions will not result in destruction of the claims. In Consolidated Rubber Tire Co. v. Firestone T. & R. Co. (C. C. A.) 151 F. 237, 238, Judge Coxe said: “It should be and is the desire of the court in approaching the consideration of a patent for a structure which has thus won a position of unchallenged supremacy in the commercial world, to endeavor to sustain rather than defeat the claims.”

Patentable novelty cannot be negatived by showing that all features of the combination may be found by selecting features from a number of patents in the prior art. In McMichael & Wildman Mfg. Co. v. Ruth, 128 F. 706, 708, the Court of Appeals for this circuit said: “Attentive examination of the testimony and exhibits has fully satisfied us that although it is perhaps possible for an expert, having the patent in suit before him, to build up the structure covered by these claims, by selecting and deftly adapting appliances theretofore known, ‘yet it would still be true that neither the same combination in its entirety nor the same mode of operation’ had previously been described or in any manner exemplified. Parks v. Booth, 102 U. S. 96, 26 L. Ed. 54; Bates v. Coe, 98 U. S. 31, 25 L. Ed. 68.”

The prior art relied upon as anticipating the patents in suit or as negativing the novel ty of the invention disclosed had defects which prevented them from going into use. In Carnegie Steel Co. v. Cambria Iron Co. (C. C.) 89 F. 721, 738, Judge Buffington said: “That no one practiced the alleged anticipation, and that no one saw, or even suggested, such possibilities in it until after the later discovery was announced, are cogent facts which warrant the most convincing assurance to a court that such knowledge was conveyed in a neglected and dormant patent.”

In Boyer v. Keller Tool Co., 127 F. 130, 138, the Circuit Court of Appeals of this circuit said: “Convinced, as we are, that the plaintiff has supplied features that have brought success, where others who had preceded him failed, we are not inclined to scan narrowly the means by which it has been obtained. The mechanical elements combined are no doubt old, and so, to a certain extent, may be the result accomplished. But nowhere do we find the same combination employed to produce it, and the efficiency attained is so much in advance of that which had gone before as of itself to suggest, if it does not prove, the exercise of inventive skiU.”

This opinion contains a statement of the essential facts and of the law applicable thereto in conformity with Equity Rule 70½ (28 USCA § 723).

I conclude that the patents in suit are valid, that the charge of infringement has been sustained, and that the plaintiff is entitled to a decree, with injunction and accounting.


text:
    In re PIPE RAILING CONST. CO., Inc.
    District Court, E. D. New York.
    Jan. 11, 1934.
    Russel H. Kittel, of New York City, for Frederick Russell.
    Samuel C. Duberstein and Max Schwartz, both of Brooklyn, N. Y., for trustee.
   CAMPBELL, District Judge.

This is a hearing on a petition to review the order of the referee, dated November 13, 1933, denying the claim of Frederick Russell, in the sum of $4,140.81, as a secured or priority elaim, and allowing the same as a general claim.

The claimant filed a proof of elaim herein against the bankrupt’s estate in the sum of $4,140.81, as a secured or priority claim, based upon an oral pledge of the machinery and merchandise belonging to the bankrupt, as security for the unpaid rent due the claimant.

The elaim in question is based upon a note for $1,426.28 for unpaid rent during the year 1931, and $2,714.53 for unpaid rent during the year 1932.

The note for $1,426.28 made by the bankrupt to the order of the claimant became due on September 5, 1932, and was protested for nonpayment.

The claimant instituted a suit against the bankrupt for unpaid rent on September 24, 1932, and also instituted summary proceedings to dispossess the bankrupt.

On October 21, 1932, the claimant recovered a judgment against the bankrupt in the sum of $2,968.64.

The claimant on October 21, 1932, issued an execution to a marshal, who took possession of the bankrupt’s property, assets, and effects on said date and remained in possession of the assets until the petition in bankruptcy was filed.

On October 27, 1932, the bankrupt fih?d a voluntary petition in bankruptcy.

The aforesaid note remained unpaid at the time of the filing of the petition in bankruptcy, and the rent for the months of September and October, 1932, was unpaid.

The marshal turned over the assets so levied on by him to the receiver in bankruptcy, and he in turn sold the same and turned over the proceeds to the trustee.

The claimant filed a claim herein with the referee on December 9, 1932.

On November 2, 1933, the trustee filed objections to the said claim of the claimant for $4,140.81, on the following grounds: (1) That there is no such sum due and owing to claimant. (2) That claimant is not entitled to priority. (3) That said claim is unsecured.

The objections of the trustee were brought on for hearing on November 10, 1933, before the referee, and on November 13, '1933, he made the order which it is sought to review herein.

The claimant testified: That in September, at or about the time that suit was instituted, he had a conversation with the officers of the bankrupt, and the officers advised him that they were unable to meet the back rent, and a demand was made on the part of the claimant for security, and that as a result of their conversations, the officers agreed to give the claimant a chattel mortgage on the machinery and merchandise of the bankrupt. No chattel mortgage was ever given. On Friday, October 21, 1932, the marshal made a levy upon the bankrupt’s property and took possession of its assets. That thereafter the claimant and officers of the bankrupt had further conversations, as a result of which, it is alleged, that the officers of the bankrupt orally agreed to pledge the assets of the bankrupt as security for the payment of the claim of the landlord.

The marshal was in possession of the property of the bankrupt under a levy at the time the alleged agreement of pledge was made, having taken possession on October 21, 1932, and remained in possession until he turned it over to the receiver in bankruptcy, after the petition in bankruptcy was filed.

The claimant did not enter into possession of such property.

No change in the condition of the bankrupt took place between September, 1932, and October 27, 1932, the time of the filing of the petition in bankruptcy.

The judgment obtained by the claimant, the landlord, was never paid, satisfied, or discharged, and is still of record.

The referee saw and heard the witnesses, his findings of fact are supported by the evidence, and there is no manifest error in his findings of fact. I therefore accept them as decisive. General Order 47 in Bankruptcy (11 USCA § 53); In re C. J. McDonald & Sons (D. C.) 178 F. 487, affirmed Bank of Marion v. Norwood (C. C. A.) 184 F. 986.

The consideration alleged by the claimant was an antecedent debt.

There was no change of possession to the claimant, and no record of any transfer, and therefore no pledge, as the marshal was in possession and remained- in possession until he turned the property over to the receiver in bankruptcy.

An oral agreement to execute a chattel mortgage would create no lien in favor of the claimant, as it would be simply an agreement and not a chattel mortgage; further, if the agreement to make a chattel mortgage was made, it was an agreement to make a mortgage covering both machinery and the merchandise of the bankrupt, which would be void under section 230-a of the Lien Law of the state of New York (Consol. Laws, e. 33); therefore the agreement would be unenforceable.

Even if the oral pledge was made, the alleged consideration was an antecedent debt, and it was on the eve of bankruptcy, after the note made by the bankrupt had been protested for nonpayment in September, 1932, after judgment had been obtained thereon and not paid, and the marshal was in possession under an execution, and after the bankrupt had failed to pay the rent for the months of September and October, 1932, and after a final order in supplementary proceedings had been obtained by the claimant against the bankrupt, and tbe bankrupt was in arrears to tbe claimant for other rent.

The claimant therefore had knowledg-e or in any event reasonable cause to believe that tbe bankrupt was insolvent, and that tbe effect of such a transfer would be to give tbe claimant a larger percentage of his debt than other creditors of tbe bankrupt in tbe same class, and therefore a preference and in violation of section 60 of tbe Bankruptcy Act(11 USCA § 96) and void.

The plea of laches of tbe trustee, set up by tbe claimant, cannot be sustained, as there is no evidence whatever that the claimant has been misled to bis injury by tbe inaction of tbe trustee in making objections to the claim of tbe claimant at an earlier date. Anderson v. Dater (D. C.) 18 F.(2d) 987, 8 A. B. R. (N. S.) 497; Lowell v. Brown (D. C.) 280 F. 193; Zimmerman v. Farmington Shoe Co. (C. C. A.) 31 F.(2d) 405; Wilkinson v. Livingston (C. C. A.) 45 F.(2d) 465.

Tbe petition to review is denied and overruled, and tbe order of tbe referee which it is sought to review herein is. confirmed.