author: CAPPEY, District Judge.

text:
    ORTLIEB v. BAUMER et al.
    District Court, 8. D. New Fork.
    Feb. 9, 1934.

      Paul Jones, of New York City (Morris H. Marder, of New York City, of counsel), for plaintiff.
    Solomon Badesch, of New York City, for defendant Peter Baumer.
    Irving Jacobson, of New York City, for defendant Marie Prances Baumer.
   CAPPEY, District Judge.

This has been a very puzzling case. It has been filled with irrelevaneies. The ill feeling between the litigants is utterly immaterial to the determination of the issues. The situation in which the bankrupt found himself — in the respects that he suffered ill health, he had domestic infelicities, and he has been greatly harassed by creditors — is likewise immaterial. Whatever might be the feeling of the court in regard to his misfortunes, which I have mentioned, they are not pertinent to the determination of the issues now before the court. If they be of any significance whatsoever, they are only to be taken into account as an aid in interpreting hisf conduct.

As I have indicated several times during the trial, there are some unsolved mysteries left by the proof and left by counsel on both sides.

What was the state of the contract arrangements or deeds, or what not, as between the defendants or either of them and the Amsterdam Company, down to March 6, 1930, has not been clearly revealed.

So also the first deed from the Amsterdam Company is dated March 6, 1930; yet, the purchase contract, as between Mr. Baumer and the Amsterdam Company, is dated the day after. Some deeds have been put in evidence. One as produced is from the Amsterdam Company to Mr. West, dated March 6, 1930. Another as produced is from Mr. West to Mrs. Baumer dated July 12, 1932. Yet, under the proof, when executed, both deeds were left with the respective names of the grantee blank.

The inference is pretty plain that the name of West, as grantee under the March, 1930, deed, was filled in at the time when thel deed was pledged by Mr. Baumer to the National Surety Company. That was in April, 1931, when the deed, with the name of the grantee blank, had been outstanding for more than thirteen months.

When, or by whom, the name of Mrs. Baumer, as the grantee, was inserted in the deed from Mr. West dated July 12, 1932, is left wholly unexplained. The affirmative evidence is that when the deed came back to Mr. Baumer from the National Surety Company in July, 1932, it was blank as to grantee. Por a considerable time it remained blank. Examination of the original document, Exhibit D, shows that the name of the grantee is in a different typewriting from the typewriting in which the body of the deed is written. The acknowledgment of the deed is as of the date of the deed itself.

So I say that we have all these mysteries unexplained. I have presented them to counsel throughout, but they have rendered me no assistance whatever in solving them. They have added to my bewilderment in trying to get at the essential facts of the ease.

Two issues are made by the pleadings:

First, Was there a transfer by the bankrupt to his wife which is voidable under the bankruptcy statute because preferential?

Second, Was there a transfer by the bankrupt to his wife which should be set aside because by it the bankrupt’s creditors were hindered, delayed, or defrauded?

Before entering on the consideration of those questions, it is well to recall that this case deals with land, and land only. It is the law that in order to transfer title to land there must be a deed. Moreover, the deed must be delivered. Title does not pass by the mere execution of a deed; in addition, there must be delivery of the deed if title is to pass. When in the light of that circumstance we examine the proof and attempt to solve the problems raised by the two issues, much of what has been said is so indefinite about so many things, there have been such complete omissions in the evidence about so many matters, there has been failure of recollection about so many matters, there have been so many silences through failure to call witnesses, there axe so many things which are uncorroborated by documents, that it is extremely difficult to get at the truth.

I may further point out that in passing on the questions I am not free to go outside the issues as made by the pleadings. While minor matters may be disregarded, I must look to the pleadings in order to render a decree on the issues as raised.

Let us first take up the first cause of action. Was there a preferential transfer by the bankrupt to his wife?

Section 60 of the Bankruptcy Act (11 USCA § 96) dealing with voidable transfers because preferential, has in mind transfers made to creditors of the bankrupt. The testimony, however, fails satisfactorily to establish that Mrs. Baumer was a creditor of her husband. That and that alone is an obstacle to setting aside the transfer, if it occurred, on the ground, as alleged, that it was preferential. Preferences are as between people in the same class, as creditors; and preferences relate only to creditors. In order for a transfer to be set aside under the provisions of section 60, as preferential, one of the elements is that the transferee shall have reasonable cause to believe that by the transfer a preference would be effected.

In weighing the evidence, if fair consideration is to be given to it, account must bq taken of the' relations between the bankrupt and the transferee, for the moment treating the bankrupt as the transferor. They were husband and wife. She lived in Pennsylvania and apparently spent most of hex time there. It is not the ordinary experience that wives know the general financial conditions of their husbands, to the extent of embracing knowledge both of assets and liabilities. There must be some proof on the subject. Yet I fail to discover in the evidence enough to warrant me in making a finding that Mrs. Baumer knew or had reasonable cause to believe that, if she accepted a transfer of the lots at Sparkhill, she would thereby be treated better than other creditors of her husband of the same class. 'Lacking a finding to that effect, the transfer cannot be set aside upon the ground that it was preferential.

The third difficulty which I encounter under the first cause of action is that the complaint charges that the bankrupt transferred the property to his wife. The facts are as Í have already set them out. There was an original purchase agreement as between the Amsterdam Company and the bankrupt, signed on March 7, 1930. What had happened before that, with reference to how the transaction should be conducted or how title should be vested, has not been brought out in the proof. On the day preceding the date of the purchase agreement, the Amsterdam Company signed a deed to a blank grantee. That deed seems to have gone into the possession of the bankrupt, although the proof is not clear as to the capacity in which he handled it, nor are his declarations and his conduct thereafter, as to the capacity in which he held it, consistent. They point either way. From the inception, the evidence as to the handling of the deed of March 6, 1930, is utterly confusing. The evidence in regard to it is extremely difficult of interpretation as affecting whether or not it was the genuine understanding between the parties that, as would not be unnatural, the husband held the instrument as agent for his wife, or whether it be a fact that the bankrupt handled, and intended to handle, the instrument as his own, because he made unambiguous declarations of ownership of the land. To the contrary of his individual ownership, the proof being inconsistent, the declarations and the acts of the bankrupt having been inconsistent, there has been evidence from which a conclusion might be drawn that the bankrupt at all times recognized that he held that instrument solely for the benefit of his wife. I cannot disbelieve the testimony to the effect that frequently the bankrupt, before making use of the instrument, did consult his wife. That would point, directly and only, to a recognition by him that he held the deed to a blank grantee as the agent and for the benefit of his wife. If that be so, not alone is there absence of the existence of the kind of instrument looked to by the law as the exclusive evidence of having title to real estate, in which the bankrupt was treated as the owner of the property; but, as I have said, if the facts be as I have recited them, there was recognition by the .husband that he held the instrument for the benefit of his wife and not as his own property.

I am endeavoring to search out the truth. Merely to point out to me that people have been inconsistent or have been careless is not enough. It is perfectly manifest that the husband, in regard to the matter, has been careless and has done inconsistent things. I think I may say that, as matter of general knowledge, in the conduct of family life there is nothing unusual about this. Husbands frequently are so trusted by their wives that they do inconsistent things, without preservation of evidence as to what the real transaction is.

There is a fourth aspect of the first cause of action, though upon this I should be unwilling to decide the case if it were all.

One of the elements of a right of recovery in a preference action under section 60 is that the person who receives it shall know or have reasonable cause to believe that the transfer will effect a preference. There is no allegation in the complaint that the transferee, Mrs. Baumer, knew or had reasonable cause to believe that the transfer would effect a preference. On the contrary, the only allegation on the subject of knowledge or belief is in paragraph 18 of the complaint, as a part of the statement of the first cause of action. This is to the effect that the bankrupt knew, or had reasonable cause to believe, that a preference would be effected.

For the reasons given, I do not feel that the first cause of action is established or that there can be a recovery thereon.

Was there a so-called fraudulent conveyance?

As I have indicated, under the law a transfer which hinders or delays creditors is denounced in law equally with a transfer which defrauds creditors. When we analyze the proof, when we examine the testimony of the bankrupt himself, as given at this trial, and when we compare that, part by part, with the testimony as given by the wife at this trial, there are many inconsistencies and conflicts. I cannot fail to take into account, as to the bankrupt himself, that he has been ill, that he has been harassed, and that he has been unhappy. As a trier of the facts, if I am fairly to appraise the evidence, I must take those features into account. I cannot fail to observe also that the wife is unaccustomed to the surroundings of a courtroom. Her testimony yesterday and to-day contained numerous inconsistencies. Furthermore, her testimony in many respects was inconsistent with the testimony of her husband.

If the original contribution by the wife toward the purchase of the Sparkliill property was such, irrespective of the amount, that it was the understanding between and the intention of the husband and the wife, prior to March 6, 1930, that the purchase of the lots was for her benefit, and if it be true, as certainly the evidence affords basis for reasonably concluding, that the taking of the deed from the Amsterdam Company, executed March 6, 1930, in form with a blank grantee, was merely for convenience, we are not concerned in this case actually with who had possession of the deed from West to a blank grantee, or with the date when the blank was filled in with the name of Mrs. Baumer, or with the date when it was put on record, or even with who held the instrument between July 12, 1932, and the date of its being put on record, December 27, 1932. This is so because if the original understanding was as claimed by the husband and the wife, that, in the light of a contribution by the wife to the purchase price, the lots were to be hers, the transaction was secure, so far as there is any basis for assault upon it in this ease, as far back as March, 1930. There is no proof whatsoever which would warrant a successful assault on the deed as far back as that, whatever may have happened as to the form of the instrument or as to who held it or as to how it was handled after West passed it back to the bankrupt.

I shall not spend much time in discussing the testimony bearing on the issue as to whether there was a fraudulent conveyance. There is one aspect of it, however, which is of consequence and which I shall discuss.

It is established that there were liabilities by the bankrupt aggregating approximately $13,000, covering transactions that, had accumulated, running from 1928 to 1932. The schedules are not proof as against the wife of what the indebtedness was. They are nothing but pieces of paper, so far as she is concerned. There must be original proof of the indebtedness as against her, in order successfully, to assail a transaction whereby she received the transfer of property. When the bankrupt was on the stand as a witness for the plaintiff, and was asked about indebtedness to various creditors, he testified in regard to a considerable group of his creditors, some fifteen or twenty, that he owed them amounts which, between various dates from 1928 to 1932, aggregated approximately $13,000. This morning'he testified to owing two other items of indebtedness. One of them was to the Joseph brokerage concern, which had been covered by testimony of the Joseph bookkeeper given yesterday, showing an indebtedness of some $2,000, but not showing that there were not securities held against the sum largely in excess of $2,000. That is, it does not appear that there was any net indebtedness to Joseph at any particular time in advance of the bankruptcy, because the proof showed that the brokerage account ran to June, 1933, four months after the bankruptcy petition was filed. Assume, however, that the indebtedness to the brokerage concern was $2,000 and ran back to the opening of the account in 1928, varying from time to time. By adding that to the $13,000, the total indebtedness would be carried to $15,000. It was brought out this morning that the bankrupt owed $900 to Herman Grimm, a brother of his wife; call it $1,000 in round figures. If this be included, then the upward limit of the bankrupt’s indebtedness, of which there has been any proof at this trial, is $16,000.

What about the assets?

The trustee was on the stand several times. Yet he gave no testimony whatsoever, nor was there proof from any other source, as to the total assets that he took into his possession. There was affirmative testimony that he went to the bankrupt’s office and took over some papers. There was no testimony by him as to whether there were other assets that came into his hands.

Let us assume, however, that nothing of value came into the hands of the trustee. The testimony put in by the plaintiff himself discloses that the Joseph brokerage concern held, during the whole of the period with which we are concerned, down to the bankruptcy, a lot of securities. Those securities were the property of the bankrupt. It may be that there were varying amounts of indebtedness owing by the bankrupt to the brokerage concern during the period covered by the account, as there often are; but, nevertheless, there is no proof whatsoever that there was, not in the brokerage account an equity in the securities that was in excess of the $16,000' of indebtedness he owed to all his creditors. The bankrupt himself tells us that there were occasions during the maintenance of the brokerage account when the excess was great; as I recall, as much as $100,000. This is the only proof the record affords as to the value of the equity in the securities.

The burden of proof is on the plaintiff. His first step in assailing the transfer should have been to show what were the assets that came into his hands. Then he was obligated to show what was their value and what was the value of any other assets of the bankrupt at the relevant date. It was up to him also to show what the liabilities were. From the showing of those two sets of facts, the court would have been enabled to tell whether or not at the relevant date the bankrupt was insolvent. The trustee has given us no picture of the assets or of their value. In consequence, he has not proved that the bankrupt was insolvent. Without proof of insolvency, there is no ground upon which the trustee is entitled to have the transfer of the lots declared fraudulent or to have it set aside.

There is no occasion to go into all the conflicts about the deed or about the time when the name of the grantee was filled in or about who handled it in sending it to be recorded. Much of the testimony in regard to those matters is very unsatisfactory. If the case turned on things like that, I should go pretty carefully into the consideration and discussion of them before I should be willing to say that the version given me by either the wife or the husband is acceptable. It would be futile, however, to go into those things. The vice in the plaintiff’s ease is fundamental. It is utterly regardless of how I should determine what I have called puzzling or what I have recited as conflicting or unsatisfactory.

The very basis of the cause of action to set aside the transfer of the lots as fraudulent is that at the time, whenever it was, the bankrupt was insolvent and, as already stated, the plaintiff has failed to show that he was then insolvent.

If the bankrupt was solvent, he had ai right to give the property to his wife. Even if he had had title to it in his own name, even if he had treated possession by him of Exhibit D with a blank grantee as holding the deed for himself to the property, if he was not insolvent, he had the right to give the lots to his wife. I go to that fundamental consideration, rather than to the other things argued, which are merely out on the edge of the controversy.

That the bankrupt was hostile to some of his creditors is manifest. It is not within my province to tell him that he was not warranted in feeling hostile. People have a right to sue. The courts are open to them to sue. When, however, the suit comes on for trial, it is necessary to determine the issues as made by the pleadings. It is the function and the business of the court to afford everybody a fair opportunity to present his side and to put in evidence. Then it becomes the duty of the court to review the evidence under the law and render its best judgment. That I have done.

The bill will be dismissed.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    STATE OF TEXAS et al. v. UNITED STATES et al.

    No. 2424.
    District Court, W. D. Missouri, W. D.
    Feb. 6, 1934:
    James V. Allred, Atty. Gen., for the State of Texas.
    Elmer L. Lincoln, of Texarkana, Tex., for City of Texarkana, Tex.
    J. A. R. Moseley, Jr., of Texarkana, Tex., for Bowie County, Tex.
    E. M. Reidy, Asst. Chief Counsel, Interstate Commerce Commission, of Washington, D. C., Elmer B. Collins, Sp. Asst, to Atty. Gen., Harold M. Stephens, Asst. Atty. Gen., and William L. Vandeventer, U. S. Atty., of Kansas City, Mo., for the United States.
    Samuel W. Moore, of New York City, and Frank H.- Moore, and Cyrus Crane (of Lathrop, Crane, Reynolds, Sawyer & Mersereau), both of Kansas City, Mo., for defendant railway companies.
    Before VAN VALKENBURGH, Circuit Judge, and REEYES and OTIS, District Judges.

      Decree affirmed 54 S. Ct. 643, 78 L». Ed. —.

   PER CURIAM.

The Texarkana & Fort Smith Railway Company is a Texas corporation owning in two segments approximately eighty-one miles of railway in that state and having its general offices and principal place of business at Texarkana. On February 13, 1932, the Kansas City Southern Railway Company, a Missouri corporation, applied to the Interstate Commerce Commission for an order authorizing the acquisition by it of control under lease of the properties of the Texarkana & Fort Smith Railway Company. Subsequently, on August 8, 1933, on account of an amendment of the Interstate Commerce Act effective June 16, 1983 (the Emergency Railroad Transportation Act [48 Stat. 211]), a supplemental application was made for a similar order. The application was granted by the Commission and its order made October 4, 1933.

The lease which had been entered into between the two railway companies included, in the second paragraph of Section 5 thereof, the following provision: “The Southern Company does not assume any obligation to maintain, during the term of this lease, any general offices, machine shops, or roundhouses for or belonging to the Texarkana Company at any particular place or places, regardless of present or previous locations thereof; but shall have the right to change any existing location of general offices, machine shops, roundhouses and terminal facilities, belonging to the Texarkana Company, and to relocate the same, and, from time to time, to change the same, during the full term of this lease, and shall have the right to make all such locations, changes, and alterations as in the judgment of the Southern Company will enable it to .operate the demised premises in the public interest and with the greatest economy and efficiency; and the Southern Company shall not be obligated or bound to perform any contractual, statutory or other obligations with reference to such matters which may now or hereafter rest upon the Texarkana Company; and any and all such changes may be made, from time to time, by the Southern Company as may be approved by the judgment of its officers or Board of Directors.”

By its order the Commission authorized the acquisition by the Missouri corporation of the properties of the Texas corporation under the lease entered into between them, and so approved the lease, including the provision of the lease hereinbefore set out. The Kansas City Southern now proposes, as permitted by the 'lease between it and the Texas corporation, to remove from Texarkana, Tex., where they are now located, and to relocate outside of Texas, the general offices, machine shops, roundhouses, and terminal facilities of the leased railroad. The state of Texas, the railroad commission of that state, Boyd county, Tex., and the city of Texarkana, the complainants in this proceeding, being interested in retaining at Texarkana the general offices, machine shops, roundhouses, and terminal facilities of the Texarkana and Fort Smith, have brought this proceeding in equity to restrain the relocation proposed and the execution of the lease in so far as the second paragraph of section 5 thereof is concerned. The two railroad companies, the Interstate Commerce Commission, and the United States are made defendants and have filed answers to complainants’ bill.

The case is here on final hearing. No question of fact is in dispute. It is admitted by complainants that the application for approval of the acquisition by the Missouri company of the properties of the Texas company by lease and for approval of the lease was duly presented to the Commission and so heard by that Commission as to comply with all requirements of the applicable statute and due process; that the Commission made a finding, fully supported by the evidence, to the effect that the continued maintenance at Texarkana of the facilities and ageneies here involved would impose an annual and unnecessary burden on interstate commerce in the amount of $81,000. But it is insisted that the provision in the lease permitting the proposed relocation and the authorization of that provision by the Commission are invalid as violating article 6278, tit. 112, of the Revised Civil Statutes of Texas for 1925.

Article 6278 must be read in connection with article 6260. In substance they require every corporation owning or operating a railway in Texas to incorporate in that state and to maintain its general offices in that state. The text of articles 6260 and 6278, so far as necessary, is set out in the margin.

The complainants disavow any contention that Congress could not under the commerce clause vest the Interstate Commerce Commission with jurisdiction to approve the acquisition by lease by one railroad company of the properties of another and to approve a provision in such a lease of the character of that in question here notwithstanding such a statute as article 6278. The very limited contention of the complainants is that Congress has not conferred such authority on the Commission. Whether it has done so is the narrow and the only question the ease presents. The question seems to us scarcely debatable.

1. When the supplemental application was presented to the Commission and its order made, the Emergency Railroad Transportation Act of 1933 had^been approved and was the law. In title 2 of that act, among other things, it is provided (section 202(4) (a, b), (15), 49 USCA § 5(4) (a, b), (15) that:

“(4) (a) It shall be lawful, with the approval and authorization of the Commission * * * for any carrier * * to * * * lease * * * the properties * * * of another. * * *
“(b) Whenever a * * * lease * * * is proposed * * * the carrier * * * seeking authority therefor shall present an application to the Commission, and thereupon the Commission shall notify the Governor of each State in which any part of the properties * * * involved in the proposed transaction is situated, and also such carriers and the applicant or applicants, of the time and place for a public hearing. If after such hearing the Commission finds that * * the proposed * * * lease " * * will be in harmony with and in furtherance of the plan for the consolidation of railway properties * * * and will promote the public interest, it may enter an order approving and authorizing such * * * lease * * * upon the terms and conditions and with the modifications * * * found to be just and reasonable. * * *
“(15) The carriers and any corporation affected by any order made under the foregoing provisions of this section shall be, and they are hereby, relieved from the operation of the antitrust laws as designated in section 1 of the Act entitled ‘An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,’ approved October 15, 1914, and of all other restraints or prohibitions by or imposed under authority of law, State or Federal, insofar as may be necessary to enable them to do anything authorized or required by such order.”

Since no question is made of the power of Congress to enact this statute, only its interpretation is now required. The language is plain and unambiguous. Unequivocally it empowers the Commission to approve the acquisition of properties of one railroad by another through a lease of those properties and to pass upon and, therefore, to approve or reject, the terms and conditions of the lease. When in a given instance the Commission has made an order approving acquisition by a lease and approving the lease, the carriers affected are, by the very words of the statute, relieved from the operation of any state law to the restraint or prohibition of which otherwise they would be subjected, if such relief he necessary to the doing of anything which the order authorizes. The order of the Commission here approved and authorized a lease under which the lessee was authorized to remove the general offices of the lessor from the state of Texas. A Texas statute restrained and prohibited the very thing thus authorized. Here then is just such a restraint and prohibition, imposed by authority of state law, as is expressly eliminated by the very words and plain meaning of the act of Congress.

But it is contended by counsel for complainants that the language of paragraph (15) set out above is not to be construed to refer to all restraints and prohibitions imposed under authority of law, state or federal, as a literal reading of the section would require, but to include only restraints and prohibitions of an anti-trust character. The rule of ejusdem generis is relied on. The same contention was made in the case of New York Central Securities Co. v. United States, 287 U. S. 12, 26, 53 S. Ct. 45, 77 L. Ed. 138. The Supreme Court did not find it necessary in that case to pass on the validity of the contention, and it does not appear ever to have been passed on by any court. The contention seems to us untenable.

There are several sufficient grounds for this conclusion. First of all, the rule ejusdem generis is a rule of construction only “to be used as an aid in the ascertainment of the intention of the lawmakers, and not for the purpose of subverting such intention when ascertained.” Mid-Northern Oil Co. v. Walker, 268 U. S. 45, 49, 45 S. Ct. 440, 441, 69 L. Ed. 841. And it is quite apparent, from a consideration of the whole act of which paragraph (15) is a part, that the intention of Congress was to make possible the consolidation of railroad properties for the primary purpose of reducing the costs of railroad operation by removing wastes from which in turn the public would profit through rate reductions and more efficient service thereby made possible. New York Central Securities Co. v. U. S., supra, loc. cit. 25, 26 of 287 U. S., 53 S. Ct. 45, 77 L. Ed. 138. Greater economy in railroad operation through consolidation and not consolidation on its own account is the end sought. To say that Congress intended to strike down only those‘federal and state restraints and prohibitions which would prevent consolidations, but did not intend to strike down such restraints and prohibitions as would prevent the accomplishment of the primary purpose of permitting consolidations, is to assume that Congress intended only a half finished piece of work. No such assumption is justified. The intent of Congress in the act was to remove all obstacles to the accomplishment of the purpose for which the act was passed.

The rule ejusdem generis, moreover, does not apply here for another reason. The rule is that where in a statute general words follow the enumeration of particular classes, the general words will be construed as applicable only to things of the same general nature as those enumerated. The particular words of paragraph (15) are — “the antitrust laws as designated in section 1 of the Act entitled ‘An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,’ approved October 15,1914.” But those are all of the antitrust laws of the United States. The particular words, therefore, embrace all objects of thair class. Application of the rule then would make meaningless the general language following the specific words — “all other restraints or prohibitions by or imposed under authority of (federal) law.” Where such a result would follow the rule does, not apply. Mason v. United States, 260 U. S. 545, 553, 43 S. Ct. 200, 67 L. Ed. 396.

Again the so-called general words of the paragraph, “all other restraints or prohibitions,” in effect are interpreted by the very context in which they appear. The carriers are to be relieved of the operation of such restraints and prohibitions “insofar as may be necessary to enable them to do anything authorized or required by such order” (i. e. order of the Commission). This is a description of the restraints and prohibitions aimed at. They are any such as would interfere with the doing of things authorized or required. The description negatives the contention that something less was intended than the- description would include.

Finally, if there were any doubt as to the conclusion that the “restraints and prohibitions” referred to in paragraph (15) include tdl restraints and prohibitions, that doubt is altogether removed by a consideration of the identical language used in title 1 of the same act. “Where the same word or phrase is used in different parts of a statute, it will be presumed to be used in the same sense throughout.” 59 C. J. 1003; Pampanga Sugar Mills v. Trinidad, 279 U. S. 211, 218,49 S. Ct. 308, 73 L. Ed. 665. As used in title 1, the meaning of the same language repeated in title 2 is fully explained by the context and that explanation is altogether inconsistent with the contention now made for a limited meaning of the words “restraints or prohibitions imposed by law, state or federal.”

In title 1, §§ 10, 11 of the act (49 USCA §§ 260, 261), the language used is as follows :

“The carriers or subsidiaries subject to the Interstate Commerce Act, as amended, affected by any order of the Coordinator or Commission made pursuant to this title shall, so long as such order is in effect, be, and they are hereby, relieved from, the operation of the antitrust laws, as designated in section 1 of the Act entitled ‘An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,’ approved October 15, 1914, and of all other restraints or prohibitions by law, State or Federal, other than such as are for the protection of the public health or safety, in so far as may be necessary to enable them to do anything authorised or required by such order made pursuant to this title: Provided, however, That nothing herein shall be construed to repeal, amend, suspend, .or modify any of the requirements of the Railway Labor Act or the duties and obligations imposed thereunder or through contracts entered into in accordance with the provisions of said Act.
“Nothing in this title shall be construed to relieve any carrier from any contractual obligation which it may have assumed, prior to the enactment of this Act, with regard to the location or maintenance of offices, shops, or roundhouses at any point.”

Obviously if the language here used were for construction it could not be contended that the words “restraints or prohibitions by law, State or Federal,” included only antitrust restraints and prohibitions. If that had been the intended meaning, then there was no necessity for the express exclusion of such restraints and prohibitions as are for the protection of the public health and safety. What is still more significant, it was thought necessary to expressly limit the phrase “restraints or prohibitions by law, State or Federal,” so as not to include restraints arising from contractual obligations with regard to the location or maintenance of offices, shops, or roundhouses at any point. If the phrase is not in title 1 limited to anti-trust laws, it cannot be so limited when repeated in title 2.

2. What we have said disposes of this ease. We add, however, that in our view the power of the Commission to authorize the lease provision complained of, although made clear by paragraph (15), does not depend on that paragraph but would exist without it. The Commission is given the power to authorize the leasing by one railroad company of the properties of another and to determine the conditions and terms of the lease. The act of Congress so empowering the Commission ex proprio vigore nullified state laws conflicting with the exercise of the power given. When Congress legislated, as by this act inter alia it did, that where possible railroad systems should be unified so that where before there were two or more connecting systems thereafter there should be one only and that one system regulated by the national government, that system no longer is subject to any state regulation involving the imposition of a burden on interstate commerce unless it be merely the incidental result of a proper exercise of the police powers of the state. After such legislation, pre-existing state laws imposing burdens on and therefore regulating the unified system cease to be effective and similarly newly enacted state laws of a like character ab initio have no validity. These are well-established principles. They are applicable to the facts of this case.

Here is a railway system interstate in character and used for the transportation of freight and passengers in commerce among the states. It was conceded at the argument that in reality it has been for years a single system, its northern terminal at Kansas City, extending thence to the Gulf of Mexico. The railway properties involved are in several states. Texas is one of these. Two segments of the main line of this system are in Texas. Together they are eighty-one miles in length. Because of Texas law a separate Texas corporation owns and operates the segments in Texas. The simple question is: “When the system has been unified as the result of an act of Congress and the common management of the whole system has been authorized to discontinue unnecessary duplication of activities, may the state of Texas still require it to maintain general offices in Texas at a cost of $81,000 per year? If Texas can require every railroad company operating within its boundaries to incorporate in Texas and to maintain general offices and yards in Texas, the other states which this system traverses may do likewise. Missouri and Arkansas and Oklahoma and Louisiana may compel it to incorporate in and to maintain general offices and yards in their respective states. A more intolerable burden on commerce among the states scarcely can be imagined.

Counsel for defendants will prepare and submit for approval and entry a decree dismissing complainants’ bill.

       "Art. 6260. No corporation, except one chartered under the laws of Texas, shall be authorized or permitted to construct, build, operate, acquire, own or maintain any railways within State.
      “Art. 6278. Railroad companies shall keep and maintain at the place within this State where its general offices are located the office of its president, or vice-president, secretary, treasurer, local treasurer, auditor, general freight agent, traffic manager, general manager, general superintendent, general passenger and ticket agent, chief engineer, superintendent of motive power and macliincry, master mechanic, master of transportation, fuel agent, general claim agent; and each one of its general offices shall be so kept and maintained by whatever name it is known, and the persons who perform the duties of said general offices, by whatever name known, shall keep and maintain their offices at the place where said general offices are required to be located and maintained; and the persons holding said general offices shall reside at the place and keep and maintain their offices at the place where said general offices are required by law to be kept and maintained,”


author: PETERS, District Judge.

text:
    JENKINS PETROLEUM PROCESS CO. v. SINCLAIR REFINING CO.
    No. 939.
    District Court, D. Maine, S. D.
    March 10, 1934.
    See, also, 56 F.(2d) 272.
    Philip G. Clifford, of Portland, Me., and C. Stanley Thompson and Frederick Schafer, both of Washington, D. C., for plaintiff.
    Verrill, Hale, Booth & Ives, of Portland, Me. (Chas. D. Booth, of Portland, Me., and Frank E. Barrows, of New York City, of counsel), for defendant. '
   PETERS, District Judge.

This bill for discovery having been passed upon and upheld by the Circuit Court of Appeals and by the Supreme Court, now comes before this court to determine what discovery the plaintiff is entitled to obtain from the defendant under the principles laid down by the two courts mentioned.

The bill and the answer having been amended and several additional interrogatories filed, the defendant objects to nearly all of the interrogatories on the ground that they are not proper in view of the opinions of the upper courts. The plaintiff points to the same opinions as authority for the discovery asked. Jenkins Petroleum Process Company v. Sinclair Refining Company (C. C. A.) 63 F.(2d) 663, 665, and Id.; 289 U. S. 689; 53 S. Ct. 736, 739, 77 L. Ed. 1449.

In the now pending suit at law between these parties, in aid of which this bill for discovery is brought, damages are claimed for breach of an agreement to assign an application for a patent called the Isom patent, owned by the defendant.

Discovery was demanded as to the number of cracking stills constructed by the defendant under the Isom patent; as to the extent and time of operation, and as to the amount of gasoline and other products yielded thereby, with an inspection of the relevant designs and drawings.

Considering the measure of damages and the evidence pertinent thereto, the Circuit Court of Appeals held that the plaintiff’s damages are the loss which it sustained by being deprived of the application and the resulting patent; that an application for a patent has no "market” value in the strict use of the term.

“Its money value may be estimated from the nature of the invention disclosed, its place in the art to which it relates, the step> which the inventor took, and the change which it effected in the practice of the art. * * *

“We do not think that a court, valuing in judicial proceedings an invention described in an application for a patent, is obliged to shut its eyes to the result of the application, nor to the commercial utility of the invention as shown by the use of it in the art or industry to which it relates. * * *
“Such evidence is not for the purpose of showing increase in value or new uses, * * * but to show the inherent character and place of the invention in question. * * * Of course commercial success of an invention may be due less to its own merit than to the ability with which it was exploited. The weight to be given such ‘evidence rests in the discretion of the jury or trier of the fact. We cannot say that no evidence of that sort ought to be received in the aetion at law to which this bill of discovery relates, and that therefore discovery of it ought not to be ordered.
“The profits if any which the Sinclair Company made by using the Isom invention have no relevancy on the question of damages, and no discovery should be ordered in respect to them. * * *
“Nor is the precise extent to which the defendant made use of the Isom invention material on the plaintiff’s case in chief. * * * The plaintiff is entitled to show the general facts about the Isom invention, not specific instances of profitable use by this person , or that. The probative value of such evidence is outweighed by the extent and complexity of the collateral inquiries which it involves.
“If, however, the defendant should deny the utility and commercial success of the invention, evidence of the defendant’s use of it might be highly significant; and under those circumstances the plaintiff would be entitled to discovery of them.
“The bill should be retained for this purpose. If such a situation shall develop at the trial prompt discovery can then be ordered.”

The Supreme Court sustained the Circuit Court of Appeals in holding that the remedy of discovery is as appropriate for proof of a plaintiff’s damages as it is for proof of other facts essential to his case. It also held that the use that has been made of the patented device is a legitimate aid to the appraisal of the value of the patent at the time of the breach. It approved the principles enunciated in the opinion of the Circuit Court of Appeals as to the extent of the discovery permitted, and states that such relief was certainly not more than the plaintiff was entitled to, and may have been less. The scope of the inquiry into the operations of the defendant concerning the use of this patent, permitted to the plaintiff by the opinion of the Circuit Court of Appeals, is wholly approved by the Supreme Court but not definitely enlarged.

It is clear, however, that the statement of principles of law by the Supreme Court require a broad, rather than a narrow or restricted, construction of the rules laid down by the Circuit Court of Appeals.

Coming now to the matter of interrogatories to be answered:

The plaintiff admits here, as it did before the Supreme Court, that under the opinion of the Circuit Court of Appeals it was not entitled to discovery of the details as to the amounts of the products resulting from the operation of the Isom cracking stills by the defendant or as to the amount of stock charged into them by the defendant, as the “precise extent” to which the defendant made use of that invention was held not material to the issue. Now, however, the plaintiff claims that by reason of a denial of the utility and commercial success of the Isom patent by the defendant the latter has brought about the contingency referred to in the Circuit Court of Appeals’ opinion and that the bar to showing the “precise extent” of use by the defendant has been removed.

I agree with the plaintiff in its interpretation of the opinion of the Circuit Court of Appeals, but do not agree that the defendant has denied the utility and commercial success of the invention. I do not consider that the amended answer goes to the extent of such a denial, nor do I think that defendant can take that position in view of its previous assertions of commercial use of the Isom invention and the positive and reiterated statements of counsel in its behalf that utility and commercial success are admitted.

It follows that objections to interrogatories 14 and 15 are sustained.

I think the same limitations apply to the interrogatories numbered 16 to 25, inclusive, which were added to the bill by amendment, and that the objections to them should be sustained, the defendant admitting utility and commercial success.

These interrogatories relate to specific instances and detailed results of certain operations by the defendant, barred by the Circuit Court of Appeals as immaterial on the plaintiff’s case in chief, and I cannot find sufficient authority in the Supreme Court opinion to justify a contrary position at the present time.

I think the other interrogatories should be answered. Some of them have been.

The defendant objects to interrogatory 1 and kindred interrogatories, which inquire whether, during the period involved, the defendant has used cracking stills embodying the characteristic features of the Isom patent, on the ground that a legal conclusion is called for, and on the further ground that defendant’s commercial stills include inventions and improvements in addition to the Isom invention. The defendant also suggests that the production of drawings asked for in connection with the answer to interrogatory 1 would raise collateral questions and add unnecessary complexity to the issues.

As to the first point, this is not an infringement suit, nor is the plaintiff asking for a construction by defendant of a patent owned by the plaintiff. The question is directed to the “general fact” as to whether the defendant has used the Isom patent in its cracking operations.

The defendant is in a better position to know this than any one else. Apparently the defendant will take the position (contrary, as the plaintiff says, to its former attitude) that a part of the usefulness of the Isom patent is due to the improvements thereon and to other inventions. This makes it more important, in order to avoid delay at the time of the trial, that the drawings referred to should be in the hands of the plaintiff’s attorneys and experts before that time.

The defendant also urges, as a general objection to the interrogatories, the alleged fact that in its cracking business other inventions and improvements on the Isom patent have played an important part and that it would only add to the complexity of collateral issues, spoken of by the Circuit Court of Appeals, to enter this field of inquiry.

In view of the fact that the Supreme Court, as well as the Circuit Court of Appeals, has held that evidence of use of the Isom patent is admissible in this case, it is not permissible for defendant to deny the plaintiff such evidence by asserting that these other inventions and improvements are involved.

It should be understood that the rulings sustaining certain objections of the defendant apply only at the present time and to the evidence on the plaintiff’s case in chief. In accordance with the practice approved by the Supreme Court, the bill for discovery is retained to be available in case of need. “If the occasion for fuller scrutiny shall after-wards develop, there may thus be an inspection of the records without the delay that would be inevitable if a new bill had to be filed with a new opportunity to the defendant to answer or demur.”

A decree may be prepared accordingly.


author: NIELDS, District Judge.

text:
    In re REPUBLIC GAS CORPORATION.
    No. 1015.
    District Court, D. Delaware.
    Feb. 23, 1934.
    William G. Mahaffy, of Wilmington, Del., and William M. Hope, of Dover, Del., for creditors filing petition to transfer.
    Harry W. Lunger (of Hastings, Stockly & Duffy), of Wilmington, Del., for the trustee in bankruptcy.
    Donald C. Swatland (of Cravath, deGersdorff, Swaine & Wood), Ernest G. Eifield (of White & Case), and Norman Bowersox, all of New York City, for creditors objecting to transfer.
   NIELDS, District Judge.

This is a petition to transfer a bankruptcy ease from this district to the Southern District of Texas. September 25, 1933, Republic Gas Corporation, a corporation of Delaware, filed in this court its voluntary petition in bankruptcy, and on the same day an adjudication was entered. October 17, 1933, an involuntary petition was filed in the District Court for the Southern District of Texas, Houston Division, by creditors of the bankrupt against the bankrupt and eight of its subsidiaries. October 20, 1933, a trustee was elected in this proceeding and duly qualified. October 30,1933, the creditors who had filed the involuntary petition in Texas filed in this court a petition for the dismissal of the voluntary petition or, in the alternative, for a transfer of the proceedings to Texas. The petition for dismissal has not been pressed. To the petition to transfer, the bankrupt and sundry creditors have filed answers and motions to dismiss. In view of the conclusion reached, it is unnecessary to pass upon the motions to dismiss.

The transfer of cases is provided for by section 32 of the Bankruptcy Act (11 USCA § 55) and General Order 6 (11 USCA § 53). Section 32 reads:

“In the event petitions are filed against the same person, or against different members of a partnership, in different courts of bankruptcy each of which has jurisdiction, the cases shall be transferred, by order of the courts relinquishing jurisdiction, to and be consolidated by the one of such courts which can proceed with the same for the greatest convenience of parties in interest.”

General Order 6, after providing for hearing and adjudication in eases where two or more petitions are filed against the same person in different districts, provides: “But the court so retaining jurisdiction shall, if satisfied that it is for the greatest convenience of parties in interest that another of said courts shall proceed with the eases, order them to be transferred to that court.”

The bankrupt was a holding company owning and holding stocks and bonds of other corporations engaged principally in the business of producing and selling in Texas oil, gas, sand, gravel, and ballast. The principal office of the bankrupt and of its subsidiaries was at Houston, Tex.

The burden of establishing by a fair preponderance of evidence that it would be for the greatest convenience of the parties in interest to transfer this ease to Texas is upon the petitioners. “Greatest convenience” and “parties in interest." have been defined by this court. In re United Button Co. (D. C.) 137 F. 668; In re Statewide Theatres Corporation (D. C.) 4 F. Supp. 86.

The amended schedules list twenty unsecured creditors having claims aggregating $4,749,300.50. The largest single creditor is Continental Supply Company of St. Louis, Mo., in the sum of $1,659,262.79'. The next two largest creditors are Saxet Gas Company and Moody-Seagraves Producing Company of Houston, Tex., with claims, including interest, aggregating $2,346,158.35'. The next in amount is Saxet Sand & Gravel Company, of Houston, Tex., in the sum of $481,378.99'. The last three creditors are subsidiaries of the bankrupt. Two preferred stockholders are listed as -unsecured creditors in the aggregate amount of $184,038.63. Both reside in Texas. Of the fourteen remaining creditors holding unsecured claims amounting to $86,572.19, three reside in Texas, one in Pittsburgh, Pa., five in New York, two in Illinois, and two in Oklahoma. Practically all of the above unsecured creditors have filed proofs of claim with the referee in this district. The amended schedules list two secured creditors, MoodySeagraves Company, of Houston, Tex., in the sum of $161,400', and Manufacturers’ Trust Company, of New York, as trustee for holders of bonds of the bankrupt amounting with interest to upwards of $8,000,000.

Seeking transfer we have the four petitioners. Lawler as receiver of Moody-Sea-graves Company holds a promissory note of the bankrupt in the sum of $150,000 with bonds of the bankrupt to the amount of $200,-000 pledged to secure this and other notes of the bankrupt; L. C. Oldham, owner of two bonds of the bankrupt of $1,000 each; Malloy H. Miller, owner of three bonds of the bankrupt of $1,000 each; and C. A. Baker, owner of two bonds of the bankrupt of $1,-000 each. No other creditor, secured or unsecured, has appeared .supporting the application to transfer.

Opposed to the transfer are the bankrupt; Continental Supply Company, an unsecured creditor in the amount of $1,730,448.09; Barrow, Wade, Guthrie & Co., an unsecured creditor in the sum of $3,311.75, also holding $5,000 of bonds; De Hydro, Inc., an unsecured creditor in the sum of $964.22; Pittsburgh Equitable Meter Company, an unsecured creditor in the sum of $4,235.99*; E. M. Thayer and Clyde L. Paul on behalf of a committee representing bonds of the bankrupt in the amount of $6,065,500 out of a total of $7,-791,500; the National Bank of Commerce of Houston, the City National Bank of Galveston, and American National Insurance Company, owners of bonds in the amount of $898,000. Aside from the amounts owing by the subsidiaries to the bankrupt, the majority of creditors of the bankrupt both in number and amount reside nearer Wilmington, Del., than Houston, Tex.

The petition to transfer and voluminous papers filed by the petitioners in support thereof recite in great detail the history of the bankrupt and its various subsidiaries, the appointment of Lawler as receiver in a state court in Texas, the removal of the cause to a federal court, the alleged abandonment of the bankrupt and its subsidiaries by their officers and the appointment of dummy officers under the domination and control of one James R. Buck of Chicago and his associates, and an attempt by Buck and his associates to put through a plan of reorganization of the bankrupt which is unfair and inequitable to the stockholders of the bankrupt. The question of “greatest convenience” in the administration of the bankrupt estate should not be obscured by a mass of evidence upon what appears to be a controversy between conflicting interests of bondholders and stockholders touching a plan of reorganization not incident to the administration of the bankrupt estate. The fairness of the plan of reorganization should be presented to the proper tribunal for consideration. With it this court is not now concerned. Moreover, proceedings were instituted by the Manufacturers’ Trust Company in the Southern District of New York on May 31, 19*33, to foreclose the indenture securing the bonds of the bankrupt. If there be any equity in the property covered by that indenture, it is obvious that it would be more convenient for a trustee administering the estate in Delaware to participate in the foreclosure proceedings in New York than for a trastee in Texas.

It is of importance that the Bankrupt Act be harmoniously administered in the several District Courts. But, where the court in the district of the domicile of a corporation has first acquired jurisdiction, entered an adjudication and undertaken the administration of the estate, jurisdiction should not be relinquished unless it be shown, by a fair preponderance of the evidence, that the court of another district can proceed with the ease for the greatest convenience of parties in interest. The petitioners have not met this burden. The six-month period for filing claims will soon expire. A transfer of the proceed-, ings to Texas will necessarily result in confusion, expense, and loss of time in the administration of the estate.

The prayer of the petition to transfer must be denied, and the petition dismissed.


author: THOMAS, District Judge.

text:
    PLIMPTON v. MATTAKEUNK CABIN COLONY, Inc. SPELLACY etal. v. FARLEY. SAME v. FARLEY et al.
    No. 1947.
    District Court, D. Connecticut.
    Feb. 17, 1934.
    Lampke & Stein, of New York City (Samuel D. Stein, of New York City, of counsel), for receivers.
    Allin, Tucker & Allen, of New York City (Lewis M. Isaacs and George L. Allin, both of New York City, of counsel), for executors.
   THOMAS, District Judge.

This matter is now before the court on the motion of the executors to quash the writ of scire facias issued pursuant to Revised Statutes, § 955, as amended (28 USCA § 778).

Receivers in equity were appointed by this court in February, 1928, upon the filing of a creditor’s bill and consent of the defendant Cabin Colony. The receivership was made permanent. The Colony’s principal asset was real estate situated in Connecticut. On April 9, 1930, Robert E. Farley, the executors’ testator, the original respondent in the proceeding to which the present motion is addressed, signed a contract to buy said real estate from the receivers subject to this court’s approval. The price was about $160,000, to be fixed exactly by survey and computation of acreage. Under the terms of the contract the buyer paid $10,000 on account,. and agreed to pay the balance on closing of title. After hearings on notice, this court, by order dated April 29, 1930, approved and confirmed said contract. An appeal from the order of sale by a group of objecting lessees was on motion dismissed as frivolous by the Circuit Court of Appeals.

Thereafter, to avoid a possible question of title, a publie auction sale, pursuant to statute, 28 USCA §§ 847, 849, was held by order of this court, and the said Farley bid in the property on the same terms specified in his contract and the April 29, 1930. order which had confirmed it. After hearing on notice, this court, by order of February 13, 1931, confirmed the publie sale to Farley.

On November 25,1931, Farley notified the receivers that he would not accept title to the property and complete his bargain on the ground that title was unmarketable. After protracted but futile negotiation between Farley and the receivers, the latter, on voluminous petitions and affidavits, obtained from this court on June 27,1933, a rule nisi directing Farley to show cause why he should not specifically perform his contract, and pay damages accrued to the estate in receivership by reason of his alleged anticipatory breach; or, in the alternative, why the property should not be ordered resold at his risk, he to respond to any loss resulting from resale and to pay accrued damage. The rule further directed him to show cause why, if he proved recusant, he should not be punished for contempt and why pendente lite he should not be enjoined from transferring any of his assets.

On August 29, 1933, Farley appeared generally with respect to all portions of the said rule which required him to show cause why he should not specifically perform his contract and/or pay money damages, but (on the ground that he had been served without the district of Connecticut, he having been for some time confined by illness to his home in New York) he appeared specially with respect to that portion of the rule which required him to show cause why he should not respond’ to the additional incidental relief prayed for and be amenable to contempt proceedings, if recusant. In opposition to the rule he served voluminous answering affidavits in support of his contention that title was unmarketable and he prayed that the rule be discharged and his $10,000 deposit be returned with interest. Thereafter, the receivers served reply affidavits, but on September 28, 1933, shortly before the matter was to have been argued, Farley died. Letters testamentary issued out of the Surrogate’s Court, Westchester county, N. Y., to his executors, on whom was duly served the writ of scire facias; and they thereupon appeared specially and made this motion to quash the writ.

Before considering the various grounds which counsel in their argument and exhaustive briefs have advanced in support of and attack on the writ, I shall quote the statute (28 USCA § 778) under which it issued:

“Death of parties; substitution of executor or administrator. When either of the parties, whether plaintiff or petitioner or defendant, in any suit in any court of the United States, dies before final judgment, the executor or administrator of such deceased party may, in case the cause of action survives by law, prosecute or defend any such suit to final judgment. The defendant shall answer accordingly, and the court shall hear and determine the cause and render judgment for or against the executor or administrator, as the ease may require. And if such executor or administrator, having been duly served with a scire facias from the office of the clerk of the court where the suit is depending twenty days beforehand, neglects or refuses to become party to the suit, the court may render judgment against the estate of the deceased party in the same manner as if the executor or administrator had voluntarily made himself a party. The executor or adminstrator who becomes a party as aforesaid shall, upon motion to the court, be entitled to a continuance of the suit until the next term of said court.
“The provisions of this section shall apply to suits in equity and in admiralty as well as to suits at law, and the jurisdiction of all courts of the United States shall extend to and over executors and administrators of any party, who dies before final judgment or decree, appointed under the laws of any State or Territory of the United States, and such courts shall have jurisdiction within two years from the date of the death of the party to the suit to issue its scire facias to executors and administrators appointed • in any State or Territory of the United States which may be served in any judicial district by the marshal thereof. No executor or administrator shall be made a party unless such service is made before final settlement and distribution of the estate of said deceased party to the suit.
“This section shall apply to suits in which any party has deceased prior to November 23,1921, as well as to suits in which any party may have died thereafter or may die hereafter. (R. S. § 955; Nov. 23, 1921, c. 142, §§ 1, 2, 42 Stat. 323, 324; Dec. 22, 1921, c. 18, 42 Stat. 352.)”

It will at once be observed that the statute is limited to a pending suit and one of a nature that survives. The first paragraph of the section has been the law since the first Congress, whose object was to provide against the abatement of actions which would otherwise abate at common law. In re Connaway, as Receiver of the Moscow National Bank, 178 U. S. 421, 20 S. Ct. 951, 44 L. Ed. 1134. In equity, the cause would not abate if it was of a nature that survived, but was merely suspended until the representative of the deceased party was substituted. F. A. Mfg. Co., Inc., v. Hayden & Clemons, Inc. (C. C. A.) 273 F. 374; Sullivan v. Asso. Billposters (C. C. A.) 6 F.(2d) 1000, 42 A. L. R. 503. The second paragraph, enacted in 1921 (42 Stat. 323), applied the section to suits in equity and in admiralty as well as to suits at law. Prior thereto, the early procedure in equity was by bill of revivor or one of that nature; later, substitution was effected by motion under the Equity Rules, the latest being rule 45 of the rules of 1912 (28 USCA § 723). Brown v. Fletcher et al. (C. C.) 140 F. 639; Ex parte Slater, Public Administrator, etc., 246 U. S. 128, 38 S. Ct. 265, 62 L. Ed. 621. But since the 1921 amendment, substitution and revivor are effected by writ of scire facias in all proper cases, whether at law, in equity, or in admiralty.

The statute says, “In case the cause of action survives by law,” but it is silent as to what causes survive and what do not. Even prior to the 1921 amendment, the rule was stated by Chief Justice Waite in Sehreiber et al. v. Sharpless, 110 U. S. 76, at page 80, 3 S. Ct. 423, 424, 28 L. Ed. 65, as follows:

“Whether an action survives depends on the substance of the cause of action, not on the forms of proceeding to enforce it.”

And whether a particular action is of a kind that survives for or against the personal representative of a deceased person is a question not of procedure but of right. Martin’s Administrator v. Baltimore & Ohio Railroad Co., 151 U. S. 673, 14 S. Ct. 533, 38 L. Ed. 311; Warren et al. v. Furstenheim (C. C.) 35 F. 691, 1 L. R. A. 40.

Since Congress' has not determined what causes of action survive, the established rule, undisputed, is that except in actions brought under a federal statute, the law of the state where the action was commenced, in this instance Connecticut, governs. B. & O. Railroad v. Joy, 173 U. S. 226, 19 S. Ct. 387, 43 L. Ed. 677. It is also conceded that the relevant portion of the pertinent Connecticut law is the following, which I quote from section 6030, General Statutes of Connecticut, Revision of 1930:

“Survival of actions and causes of action. No cause or right of action shall be lost or destroyed by the death of any person, but it shall survive in favor of or against the executor or administrator of such deceased person. No civil action or proceeding shall abate by reason of the death of any party thereto, but it may be continued by or against the executor or administrator of such decedent. In case of the death of any party plaintiff, his executor or administrator may enter within six months thereafter and prosecute the suit in the same manner as his testator or intestate might have done if he had lived; and, in ease of the death of any party defendant, the plaintiff may have a writ of scire facias against such decedent’s executor or administrator to show cause why judgment should not be rendered against him, which shall be served at least twelve days before the day upon which it is returnable, and upon its return the action may proceed. The provisions of this section shall not apply to any cause or right of action or to any civil action or proceeding the purpose or object of which is defeated or rendered useless by the death of ary party thereto; nor to' any civil action or proceeding whose prosecution or defense shall depend upon the continued existence of the persons who are plaintiffs or defendants; nor to any civil action upon a penal statute.”

In Pickett v. Ruickoldt, 91 Conn. 680, at page 683, 101 A. 82, 83, Judge Beach, speaking for the Supreme Court of Errors, said, in interpreting this statute:

“Under this statute the survival of actions is the rule and not the exception, and the presumption is that every cause or right of action survives until the contrary is made to appear by way of exception to the rule.”

In Reed v. Copeland et al., Executors, 50 Conn. 472, 47 Am. Rep. 663, specific performance was granted the plaintiff against the defendant’s executor. On page 488 of 50 Conn., Judge Loomis said:

“The fact that one of the parties has deceased is no objection to the remedy sought, for it is a settled rule that equitable remedies exist to the same extent against executors and administrators as they did against the decedent.”

See, also, Merwin v. Merwin, 75 Conn. 8, 52 A. 614; Dunn et al. v. Grant et al., 81 Conn. 127, 70 A. 703; Raymond, Conservator, v. Bailey, Administrator, 98 Conn. 201, 118 A. 915; Orr v. Ahern, Administrator, 107 Conn. 174, 139 A. 691.

In Mitchell et al. v. Hotchkiss, 48 Conn. 9, 40 Am. Rep. 146, the court, in construing the same section, stated:

“The executor represents the person of the testator, and in legal consequence may be said to continue his existence with respect to all his debts, covenants and contract obligations, which became due during his life or after his death, except such as depend on his personal skill, in which is always implied the condition that the contractor is not prevented from completing his contract by the act of God.
“But all private as well as public wrongs and crimes are buried with the offender. The executor does not represent or stand in the place of the testator as to these, or as to any acts of malfeasance or misfeasance to the person or property of another, unless some valuable fruits of such acts have been carried into the estate; and this in strictness constitutes no exception to the rule, for the executor in such case cannot be made liable for the tort of his testator, but only for the implied promise which the law raises and allows the injured party to put in the place of the wrong.”

The executors refer to Hedenburg v. Hedenburg, 46 Conn. 30, 33 Am. Rep. 10, in support of their contention, but in that ease there was no pending suit, and original jurisdiction was denied, not only because the decedent never had resided and never had any assets in Connecticut, but because the court was apparently swayed by the plaintiff’s laches.

It would seem clear then that by the law of Connecticut, which here governs the survival of causes, actions sounding in contract survive, and also actions in tort where the decedent retained the fruits of his wrongdoing.

Before considering, on principle, the executors’ objections to their being substituted, I should say at once that on authority alone, their motion must be denied. Precisely in point is Luster et al. v. Martin et al., 58 F.(2d) 537, decided by the Circuit Court of Appeals for the Seventh Circuit. That was a stockholders’ suit against the president of a corporation for breach of contract and for appointment of a receiver of an alleged resulting trust fund. The suit was commenced in the Wisconsin state court and removed to the federal court there. The defendant had moved to and died a resident of Missouri and his executors were appointed by the probate court of Missouri. The plaintiffs revived the action by service of scire facias on the executors, who then appeared specially and moved to quash the writ. The motion was denied. The action was ordered continued against the executors who were directed to deliver to the receiver a sum equal to the trust fund and interest amounting to $266,345. Among the objections urged by the executors and considered but rejected on appeal to the Circuit Court of Appeals, there was the claim that the court had no jurisdiction of the trust funds since they did not have a situs in Wisconsin, and that as the property constituted part of the decedent’s estate and was in the possession of the probate court of Missouri (a court of competent and exclusive jurisdiction), the District Court had no power to appoint a receiver or render a decree affecting that property. Though I have not seen the record, I am informed by counsel that the appellants, in their petition for writ of certiorari (287 U. S. 637, 53 S. Ct. 86, 77 L. Ed. 552), which was denied, raised also the question of the constitutionality of this revivor statute. As will hereinafter appear, practically the same basic objections are raised by the executors on the instant motion, and the objections are largely subject to the same vices.

The executors here, as in the Luster Case, urged Burrowes v. Goodman (C. C. A.) 50 F.(2d) 92, 77 A. L. R. 249, as authority to quash the writ.' That ease, if applicable, would be binding upon me as the decision of this circuit. But, as pointed out by Judge Evans in the Luster Case, on page 540 of 58 F.(2d):

“The case of Burrowes v. Goodman (C. C. A.) 50 F.(2d) 92 [77 A. L. R. 249], much relied upon by appellants, is clearly distinguishable on the ground that no suit was pending in that ease when the party died. It was therefore not a ease of revival of action under section 778 [28 USCA].”

Examination of the Burrowes Case makes clear its inapplicability to the ease at bar. That was an original action commenced by plaintiff, as receiver of a North Carolina National Bank, against the defendant as executrix appointed in Pennsylvania. The reason the court considered the status of foreign executors and certain New York cases which are also cited by the executors on the present motion, was because the executrix had entered a general appearance when the suit was commenced and on appeal there was presented the question whether she might submit to the jurisdiction in New York, where the pertinent New York statute had been repealed. The court was therefore called upon to interpret the laws of New York governing an original suit against a foreign executrix and had accordingly applied the statutory and case law of New York. There in no way was involved a consideration, nor is there any reference in. that case to 28 USCA § 778, which governs substitution in a pending suit where, as in the instant case, the court had jurisdiction.

The executors further rely on Moore, Treasurer, v. Mitchell et al., Executors, 281 U. S. 18, 50 S. Ct. 175, 74 L. Ed. 673, affirming the decision of the Circuit Court of Appeals for the Second Circuit, 30 F.(2d) 600, 65 A. L. R. 1354. But that case is likewise not applicable here because, again, there was no pending suit but an effort to obtain original jurisdiction in the suit brought in a New York Federal District Court [28 F.(2d) 997] by an Indiana county treasurer against New York executors to collect Indiana taxes on intangible property. Not only had the assessment not been made, but even the Indiana statute, under which the treasurer was authorized to sue, had not been passed until after the testator’s death; nor was it alleged that any of the testator’s property had ever been physically within the' state of Indiana or that the testator had died there. There was the added distinction, as pointed out by Judge Mantón who wrote the opinion for the Circuit Court of Appeals. On page 602 of 30 F.(2d), he said:

“Taxes are imposts, not debts, collected for the support of the government. * * * No contractual or quasi contractual obligation to pay arises out of the assessment. The enforcement of revenue laws rests, not on consent, but on force and authority. * * * The revenue laws of one state have no force in another. The taxing power of a state is, by the federal Constitution (Amendment 14), limited to persons and property within its jurisdiction.”

But aside from the penal and peculiar aspects of revenue laws, it is sufficient to distinguish the case on the ground that there was no pending suit. The case makes no reference to the federal revivor statute.

The rule in the Luster Case would, therefore, seem controlling. Nor has its authority been reduced, as suggested by the executors, because the same court in a later decision, Williams v. Williams et al. (C. C. A.) 61 F.(2d) 257, cited the Burrowes Case and not its previous Luster decision. Suffice it to say that in the Williams Case there was again involved no pending suit, nor the revival statute, but a different one dealing with substituted service. In addition to the Luster decision, the following, and apparently all the other eases decided since the 1921 Amendment, sustain the scope and object of the statute: Heath et al. v. Santa Lucia Co. S. A. et al. (D. C. S. D. N. Y., 1924) 3 F.(2d) 326; Randall et al. v. Proceeds of The Scranton (D. C. W. D. N. Y., 1927) 23 F.(2d) 843; In re Statler (The Miramar) 31 F.(2d) 767 (D. C. S. D. N. Y., 1929), affirmed in (C. C. A.) 36 F.(2d) 1021, certiorari denied in 281 U. S. 752, 50 S. Ct. 355, 74 L. Ed. 1163; Little v. Keaton (C. C. A., Tenth Circuit, 1930) 38 F.(2d) 457, certiorari denied in 282 U. S. 847, 51 S. Ct. 26, 75 L. Ed. 751; Brown-Crummer Inv. Co. v. City of Florala (D. C. Ala., 1931) 55 F.(2d) 238; Gaskins v. Bonfils (D. C. Colo., 1933) 4 F. Supp. 547. I conclude that on the authority of the decided eases, the executors’ motion must be denied and they should be substituted in the pending proceeding.

I shall now examine the question on principle. The executors urge that the statute does not purport to confer authority to issue the writ in this matter. Despite its clear and general language, they suggest that within its intent and meaning, the pending proceeding was not a “suit,” nor was Farley a “party,” nor was he a “defendant.”

Nevertheless, they cite eases which support the doctrine of the leading ease of Camden v. Mayhew, 129 U. S. 73, 9 S. Ct. 246, 32 L. Ed. 608. On page 85 of 129 U. S., 9 S. Ct. 246, 249, Mr. Justice Harlan said:

“Where a purchaser refuses, without cause, to make his bid good, he may be compelled to do so by rule or attachment issuing out of the court under whose decree the sale is had. * * * If, as is clear, the purehaser can be required, by rule or attachment, to pay into court the entire sum bid by him and thus complete his purchase, it is difficult to see why a bidder, sought to be made liable for a deficiency resulting from a resale caused by his refusal to make his bid good may not be proceeded against in the same suit by rule, or in any other mode devised by the court that will enable him to meet the issue as to his liability.”

The rule nisi which issued herein against Farley was therefore the proper procedure and constituted, in my view, a proceeding embraced by the generic term “suit” as used in the statute.

In Weston v. Charleston, 2 Pet. 449, 464, 7 L. Ed. 481, the Supreme Court of the United States, in answering the inquiry, “Is a writ of prohibition a suit,” held that the word “suit” in the twenty-fifth section of the Judiciary Act of 1789, applies to any proceeding in a court of justice in which the plaintiff pursues in such court the remedy which the law affords him, and therefore held that a writ of prohibition is a “suit.” On page 464 of 2 Pet., Chief Justice Marshall said:

“The term is certainly a very comprehensive one, and is understood to apply to any proceeding in a court of justice, by which an individual pursues that remedy in a court of justice which the law affords him. The modes of proceeding may be various, but if a right is litigated between parties in a court of justice, the proceeding by which the decision of the court is sought, is a suit.”

See, also, McPike v. McPike, 10 Ill. App. 333; Bouvier, Third Revision, vol. 2, page 3181. The word “party” is also a generic term. A bidder at a judicial sale is one who offers to pay a specified price for an article at a public auction, and if the bid is accepted by the court, as here, he thereby becomes a “party” to the “suit,” or at least, a “quasi party.” In State of Tenn. v. Quintard, 80 F. 829 (C. C. A. Sixth Circuit), it was held that a purchaser at a master’s sale becomes a quasi party'to the suit, and is affected with notice of every step subsequently taken in the case relating to the purchase and the title acquired thereby.

In Blossom v. Milwaukee, etc., Railroad Co., 1 Wall. 655, 17 L. Ed. 673, which was cited in Camden v. Mayhew, supra, Mr. Justice Miller, on page 656 of 1 Wall., said:

“A purchaser or bidder at a master’s sale in chancery subjects himself quoad hoe to the jurisdiction of the court, and can be compelled to perform his agreement specifically. It would seem that he must acquire a corresponding right to appear and claim, at the hands of the court, such relief as the rules of equity proceedings entitle him to.”

Farley was a “party” within the meaning of the statute and no less so because in the pending proceeding he was called “respondent” instead of “defendant.” None of these words is to be construed literally, for the statute expressly applies to suits in admiralty, where the parties are called “libellant,” “claimant,” or “respondent,” though these designations are not used in the statute.

The executors next urge that, assuming ex hypothesi that Farley became a party to a suit, the cause of action did not survive because, on his death, this court became powerless to punish him for contempt. This is to confuse remedy with cause of action. The gravamen of the cause of action is breach of contract and, as already mentioned, the cause is of a nature that survives; it does not abate because one of several remedies, alternative or cumulative, cannot be applied. Specific performance and/or payment by the executors, should the court so decree, are not precluded by their testator’s death. In Sullivan v. Associated Billposters, supra, the Second Circuit Court of Appeals adapted the remedy to the changed conditions when in an action under the Sherman Anti-Trust Act it' allowed against an executor the plaintiff’s actual damage, but not the treble punitive damages which would have been assessed against the decedent. Aside from general principles, the contract itself expressly provided it should survive the death of either party.

The executors next contend that in this court they are foreign executors and cannot be compelled to submit to its jurisdiction against their will, and if the statute be so construed, it violates the due process of law clause of the Fifth Amendment of the Federal Constitution. The numerous eases cited in support of this contention I find inapplicable for one or more of the following reasons, namely, that no suit was pending; that state and not federal power was involved; and that there was involved the statute before its amendment in 1921. Thus, Moore v. Mitchell, supra, and Burrowes v. Goodman, supra, and the series of New York cases therein considered. Likewise, in that landmark, Pennoyer v. Neff, 95 U. S. 714, 24 L. Ed. 565, there was no pending suit and the court, in construing an Oregon statute, decided that the Oregon state court did not obtain original jurisdiction of a nonresident by mere publication. Similarly, in Thorbum v. Gates (D. C.) 225 F. 613, there was no pending suit and a New York statute was under consideration. The distinction between original jurisdiction and retaining it in a pending cause (to which the revivor statute is limited), has long been recognized. In 1810, Chief Justice Marshall said in McKnight v. Craig’s Administrator, 6 Craneh, 183, at page 187, 3 L. Ed. 193:

“ * * * The defendant upon the scire facias can only plead what the intestate could have pleaded; and that it is not to be considered as a proceeding against the representative of the deceased, but a continuance of the original aetion.”

Most recently, in Ormsby v. Chase, 290 U. S. 387, 54 S. Ct. 211, 78 L. Ed. 378, decided by the United States Supreme Court, December 11, 1933, Mr. Justice Butler pointed out that the same distinction is recognized and said:

“As there had been no suit, no question of revivor is presented.”

Citing Martin v. Baltimore & Ohio Railroad, 151 U. S. 673, 691, 14 S. Ct. 533, 58 L. Ed. 311, et seq., Baltimore & Ohio Railroad Co. v. Joy, 173 U. S. 226, 19 S. Ct. 387, 43 L. Ed. 677.

That there is a distinction between federal and state powers has also been repeatedly recognized. Among the eases relied upon by the executors, e. g., Pennoyer v. Neff, supra, Mr. Justice Field pointed out, page 732 of 95 U. S., that:

“Whilst they (the courts of the United States) are not foreign tribunals, in their relations to the State courts, they are tribunals of a different sovereignty, exercising a distinct and independent jurisdiction. * * * ”

And in Moore v. Mitchell, supra, the Supreme Court of the United States held that federal courts exercise a jurisdiction that is independent of and under a sovereignty that is different from that of a state. And in Thorbum v. Gates, supra, Judge Learned Hand, at page 617 of 225 F., says:

“The Constitution, in giving to federal courts jurisdiction over controversies between diverse citizens by sovereign power, gives an authority pro tanto over domestic administration which does not exist between independent states. It might, indeed, have gone further and made effective its own decrees, assuming the total administration of decedents’ estates, except for the fact that this might involve purely domestic matters, and perhaps because it had no machinery.”

In Vaughan v. Northup, Administrator, 15 Pet. 1, at page 6, 10 L. Ed. 639, Judge Story points out that:

“The United States, in their sovereign capacity, have no particular place of domicile, but possess, in contemplation of law, an ubiquity throughout the Union.”

The creation of the federal courts, their jurisdictional limits, and the power of Congress in respect thereof, are considered in United States v. Union Pacific R. R. Co., 98 U. S. 569, 25 L. Ed. 143, where the Supreme Court sustained the constitutionality of an act very similar in principle to that of the revivor act as amended. In that ease there was reviewed the Act of March 3, 1873 (17 Stat. 509), which authorized the federal court where the cause was pending, to issue process against parties and their representatives where deceased, and to issue its writs to any" districts. The same objections were there urged against the power of a federal court by its writ sent without the district to subject foreign executors to its jurisdiction against their will, but the Supreme Court unanimously sustained that power.

Whether or not prior to 1921, federal courts, in the absence of congressional mandate, refrained from exercising jurisdiction over foreign executors in a pending suit, the 1921 amendment obviously intended to grant the exercise of such power.

In Luster v. Martin, supra, Judge Evans, at page 539 of 58 F.(2d), said:

“The 1921 amendment to section 778, title 28, extended the revival of actions against administrators and executors. The effect of this amendment is disclosed in the two cases of Lawrence v. Southern Pacific Co. (C. C.) 177 F. 547 (decided in the second circuit before the amendment), and Randall v. Proceeds of The Scranton (D. C.) 23 F.(2d) 843, 845. It was to extend the rights of action which otherwise survived by law to cases against executors and administrators of a deceased party, who were appointed under the laws of any state that the amendment was enacted.”

In the Randall Case, Judge Hazel, at page 845 of 23 F.(2d), said:

“It suffices for me to say that section 778, tit. 28, of the U. S. Code (28 USCA § 778) confers the right, on executors and administrators of any party who dies before final judgment or decree, regardless of their appointment in another state or territory, to sue and be sued at law or equity, or to intervene in admiralty.”

As to what constitutes due process? In Blackmer v. U. S., 284 U. S. 421, on page 440, 52 S. Ct. 252, 256, 76 L. Ed. 375, Chief Justice Hughes, said:

“The requirement of due process in such a case is satisfied by suitable notice and adequate opportunity to appear and to be heard.”

In that case, federal process was served in France on a citizen of the United States by the United States Consul. The statute (28 USCA §§ 711-718) was declared constitutional. It would seem not open to doubt that the writ of scire faeias served by the United States marshal under the revivor statute we are considering and which provides that the executors may not be defaulted within twenty days after service, constitutes due process.

It is further argued that the executors are assignees by operation of law, and, as they have not assumed the obligations of the-contract, specific performance does not lie against them. I do not consider that the status of the executors in the present ease is that of the ordinary assignee who has acquired the rights but has not assumed the obligations of a contract; rather are the executors here to be deemed the continuance in law of their testator who admittedly subjected himself to the jurisdiction of this court. The statute requires them not to appear and defend an original suit, but merely to take the place of their testator in one already pending against him. This is recognized by various cases already cited. Among them is authority for specific performance against executors. See Reed v. Copeland, supra. But even were the law otherwise, it does not follow that the suit must abate, for, in lieu of specific performance, money damages may be decreed or such other appropriate relief granted as a court of equity may under the circumstances deem just. Sullivan v. Associated Billposters, supra.

Finally, the executors argue that to impose upon them the burden of specific performance without reference to the financial condition of the testator’s estate would be an improper interference by this court with the ordinary process of the Surrogate’s Court and might constitute a preference to one group of creditors over others. I find these objections likewise untenable. The mere retention by this court of its jurisdiction in the pending suit may give it that “authority pro tanto over domestic administration,” referred to in Thorburn v. Gates, supra; but, as pointed out in that ease, such a result flows from the federal jurisdiction granted by the Constitution. If there be a conflict pro tanto between federal and state power, it would seem clear Congress intended that at least in a pending suit, the federal jurisdiction should be retained and not surrendered. Assuming that this court should decide adversely to the executors and decree specific performance or grant such other relief as might result in a priority in favor of one group of creditors, is not a valid ground for denying the court’s jurisdiction. The executors took the estate saddled with its obligations, fixed or in course of being determined by the proper tribunal, and the right of each creditor was subject to the rights of other creditors. The law generally recognizes certain priorities, as for example, taxes; and in the administration of decedents’ estates, the probate law generally allows certain preferences, as for example, funeral expenses. In any event the plea for possible inequity is premature. Non constat the estate cannot meet all obligations in full, but if an adverse determination in the pending proceeding would result in an unjust priority, this court of equity may be presumed, on being apprised of the facts, to decree the form of relief consonant with equitable principles.

I conclude that both on the authority of decided eases, and likewise on principle, the motion must be denied; and it is so ordered.