author: BLACK, District Judge.

text:
    PACIFIC FRUIT & PRODUCE CO., Inc., v. UNITED STATES.
    Civil Action No. 592.
    District Court, W. D. Washington, N. D.
    April 13, 1945.
    Findings of Fact.
    I. The plaintiff’s, Pacific Fruit and Produce Company, Inc., principal place of business is Seattle, State of Washington, and it was organized under the laws of the State of Delaware in 1931 under the name of General Fruit Corporation. Pursuant to a merger agreement, dated December 2, 1935, the plaintiff changed its name to Pacific Fruit and Produce Company, Inc. Prior thereto the General Fruit Corporation was the owner of all of the capital stock, both common and preferred, of the Pacific Fruit and Produce Company, a Washington corporation, and all of this stock was cancelled on January 1, 1936. The plaintiff corporation had 131,293 shares of common stock issued and outstanding and this stock was cancelled and converted into the same number of shares with a par value of $10.00 each. Under the merger agreement, dated December 2, 1935, all of the assets of the Pacific Fruit and Produce Company were acquired, as of January 1, 1936, by the plaintiff, Pacific Fruit and Produce Company, Inc., and it assumed all of the liabilities of the Pacific Fruit and Produce Company, and the agreement specifically provided that all rights of creditors and all liens upon any property of the Pacific Fruit and Produce Company should be preserved, unimpaired and all debts, liabilities and duties of that corporation should be henceforth attached to and be enforced against the plaintiff corporation, Pacific Fruit and Produce Company, Inc., to the same extent as if said debts, liabilities and duties had been incurred or contracted by it.
    The Pacific Fruit and Produce Company had issued 850,000 par value, six per cent serial gold notes on December 1, 1927, which was one of the liabilities so assumed by the plaintiff corporation under the mer-, ger agreement. The National Bank of Commerce of Seattle, Washington, was made trustee for these notes and Article I of the note indenture reads, in part, as follows:
    “Article I.
    “Section 1. The aggregate face amount of all the notes issued 'hereunder shall not exceed the sum of eight hundred fifty thousand dollars ($850,000.00). The notes shall be known as the Six Per Cent. Serial Gold Notes of the Company, shall be substantially of the tenor and effect hereinbefore recited, and shall be in the denomination of one thousand dollars ($1,000.00) or of five hundred dollars ($500.00).
    “There shall be six hundred fifteen (615) notes of the denomination of one thousand dollars ($1,000.00) each, numbered from M-l upwards consecutively and continuously, thirty (30) of which shall mature and be payable on the 1st day of December, 1928, and thirty (30) of which shall mature and be payable on the first day of June and the first day of December of each year thereafter up to and including the 1st day of June, 1933; thirty-five (35) of which shall mature and be payable on the 1st day of December, 1933, and thirty-five (35) of which shall mature and be payable on the first day of June and the first day of December of °each year thereafter up to and including the 1st day of December, 1937.
    “There shall be four hundred seventy (470) notes of the denomination of five hundred dollars ($500.00) each, numbered from D-l upwards consecutively and continuously, twenty (20) of which shall mature and be payable on the 1st day of December, 1928, and twenty (20) of which shall mature and be payable on the first day of June and the first day of December of each year thereafter up to and including the 1st day of June, 1933; thirty (30) of which shall mature and be payable on the 1st day of December, 1933, and thirty (30) of which shall mature and be payable on the first day of June and the first day of December of each year thereafter up to and including the 1st day of December, 1937.”
    Section 15 of Article II of the indenture reads as follows:
    “Article II.
    “Section 15. That in case of any default in the payment of any of the notes or any interest thereon, it will not during the existence of such default, declare or pay any dividends upon any of its capital stock. Nor will it pay any dividends upon any of its common stock or make any payments by way of bonuses or gratuities to any of its employees or stockholders other than dividends upon its preferred stock unless an amount of money sufficient to pay all of the next maturing semi-annual payments of principal and interest of the notes shall first have been set aside for, and thereafter applied to, the payments last mentioned.”
    II. The plaintiff’s total obligations evidenced by notes on May 1, 1936, amounted to- $2,416,164.20, a part of which it retired as follows:
    Creditors Amount Retired by Payment ’ Í936 Í937

      6% Serial Gold Notes $ 100,000.00 $100,000.00
    Seattle-First Nat. Bank 250,000.00 - -
    Bank of California 200,000.00 - -
    Nat. Bank of Commerce 200,000.00 — -
    Peoples Bank & Trust Co. 50,000.00 - -
    First Security — commercial paper .100,000.00 — -
    Conrad Bruce & Company 280,000.00 - “
    Palmer Stacy-Merrill 14,108.79 14,108.79
    Bank of Manhattan - - 250,000.00
    Notes Payable - - 114,950.00
    Total $1,194,108.79 $479,058.79

      At the beginning of years 1936 and 1937 plaintiff had cash on hand in the amounts of $410,135.15 and $470,227.57, respectively, and during said years it paid dividends in the amounts of $393,879.00 and $425,-000.29, respectively. Plaintiff’s adjusted taxable net income for said years was $622,562.68 and $551,681.77, respectively. In its returns, plaintiff reported an aggregate paid in and earned surplus of $2,671,-892.46 on December 31, 1935, $2,229,009.93 on December 31, 1936, and $615,881.93 on December 31, 1937.
    III. On March 15 and May 15, 1937, plaintiff filed with the then Collector of Internal Revenue for the District of Washington, Thor W. Henricksen, a tentative corporation income and excess profits tax return and a completed return, respectively, for the year 1936. The completed return disclosed a net income of $578,008.59, total normal tax of $60,041.29, surtax on undistributed profits of $13,325.50 and a total tax liability of $73,366.79, which amount was duly assessed and paid as follows:
    Year Amount Date Paid
    1936 $18,390.20 (tax) Mar. 15, 1937
    1936 18,293.20 (4 June 15, 1937
    1936 18,341.69 U Sept. 15, 1937
    1936 18,341.70 (( Dec. 14, 1937
    IV. On March 15, and May 14, 1938, the plaintiff filed with the aforesaid Collector of Internal Revenue a tentative and completed corporation income and excess profits tax returns, respectively, for the year 1937. The completed return disclosed a net income of $534,118.31, normal tax of $59,832.75, surtax on undistributed profits of $3,542.81, and a total tax liability of $63,375.56, which amount was duly assessed and paid as follows:
    Year Amount Date Paid
    1937 $16,097.23 (tax) Mar. 15, 1938
    1937 15,590.55 (4 June 14, 1938
    1937 15,843.89 (4 Sept. 13, 1938
    1937 15,843.89 ft Dec. 15, 1938
    V. After a field investigation, plaintiff was advised by a 30-day letter, dated November 16, 1938, of a proposed deficiency in tax of $12,838.80 for 1936, to which proposed deficiency plaintiff filed a protest on January 25, 1939. On January 26, 1939, the plaintiff was furnished a copy of the Revenue Agent’s report indicating a proposed deficiency in tax of $4,351.34 for 1937. A conference with respect to certain issues not involved in the instant suit was had in the Revenue Agent’s office on April 3, 1939, and as a result of that conference, the proposed deficiency for 1936 was reduced to $12,553.12. The 1936 deficiency, plus interest of $1,577.51, or a total of $14,130.63, was paid on April 19, 1939, and the 1937 deficiency, plus interest of $221.21, or a total of $4,572.50, was paid on January 21, 1939. The assessments in those amounts were made by the Commissioner on April 22, 1939, and January 28, 1939, respectively.
    VI. On March 15 and May 9, 1940, the plaintiff filed an original and amended 1936 refund claims, respectively, and said amended claim, as grounds for refund, alleged :
    “The amount of Corporate obligations retired during 1936 (in existence before May 1, 1936) should be deducted Line 30 Form 1120 — 1936—Corporate obligations retired amounted to $1,194,108.79 in 1936. The application of this amount against adjusted net income would eliminate the Surtax on Undistributed Profits amounting to $19,195.51.”
    VII. On May 17, 1940, plaintiff filed a 1937 refund claim and, as grounds for refund, alleged:
    “The amount of corporate obligations retired during 1937 (in existence before May 1, 1936) should be deducted on Line 28, Form 1120, Corporation Income & Excess Profits Tax Return for the year 1937. The corporate obligations retired in 1937 amounted to $479,058.79. The application of this amount against the adjusted net income would entirely eliminate the Surtax on Undistributed profits, amounting to $5,259.63.”
    VIII. By letters dated December 13, 1940, and February 19, 1941, the Commissioner of Internal Revenue advised the plaintiff that its claims for refund for 1936 and 1937, respectively, were disallowed and rejected, and the above suit was commenced on September 25,1942.
    On September 14, 1943, there was filed with the Collector of Internal Revenue a document entitled “Petitioner’s Claim for Refund,” and, as additional grounds for refund, alleged:
    “That Section 14(a) and Section 26 of the Revenue Act of 1936 have been amended by Section 501 of the Revenue Act of 1942, 26 U.S.C.A. Int.Rev.Acts, the terms of which entitled the petitioner to a refund of the within described taxes, together with interest from the date of payment. That this petition for refund is submitted by virtue of the terms of the 1942 Revenue Act, requiring a petition to the Collector of Internal Revenue for the refund of said taxes erroneously paid.”
    From the foregoing Findings of Fact, the Court makes the following
    Conclusions of Law.
    I. That this Court has jurisdiction of the parties and subject matter involved.
    II. That the plaintiff was not entitled to a credit under the provisions of section 26(c) (2) of the Revenue Act of 1936, 26 U.S.C.A. Int.Rev.Acts, page 835, in determining the amount of undistributed profits subject to tax for the years 1936 and 1937.
    III. That the plaintiff was not entitled to a credit under the provisions of section 26(c) (1) of. the Revenue Act of 1936, in determining the amount of undistributed profits subject to tax for the years 1936 and 1937.
    IV. That the plaintiff was not entitled to any additional credits under the provisions of section 501 of the Revenue Act of 1942, amending sections 14(a) and 26(c) of the Revenue Act of 1936, for the years 1936 and 1937.
    Ryan, Askren & Mathewson and William J. Madden, all of Seattle, Wash., for plaintiff.
    Samuel O. Clark, Jr., Asst. Atty. Gen., Andrew D. Sharpe and James P. Garland, Sp. Assts. to Atty. Gen., and J. Charles Dennis, U. S. Atty. and Thomas R. Winter, Sp. Asst. to Chief Counsel, Bureau of Internal Revenue, both of Seattle, Wash., for defendant.

       Payments made .on serial gold notes in accordance with the provisions in the above-mentioned note indenture, and there had been no default in the payment of these notes.

   BLACK, District Judge.

Now we come to the matter of Pacific Fruit & Produce Company, Inc., versus United States of America. The matters in issue in this action have been very exhaustively presented by counsel. The issue is one that certainly would justify a carefully written opinion. I haven’t had time as yet to prepare a written opinion. If I do not give a decision today, I probably will have no opportunity to give a decision, written or oral, for a number of weeks by reason of other pressing matters requiring my attention and by virtue of being required to hold court for a number of weeks outside the state. I think it is far preferable that counsel should know the Trial Court’s conclusion,' regardless of whether or not counsel feel that any language has been used which should be commended. It, therefore, is my intention to make my decision brief so that the parties may be aware of the ultimate result in this Court. The decision in this case has been delayed sufficiently long already by reason of the nature of the dispute. It should not be delayed longer merely in order to afford a chance to file a memorandum opinion.

I have considered the question, the facts as agreed, the arguments of counsel and their citations as they have respectively submitted same. I am of the opinion that the plaintiff is not entitled to recover. My decision therefore will be that plaintiff’s action should he dismissed. I haven’t determined whether or not plaintiff is entitled to maintain the action. Plaintiff contends that the history of the assumption by plaintiff of an obligation of a previous corporation was such and the assumption was of sufficiently early enough date as to permit plaintiff to maintain this action. The Government contends that the decisions of the courts are to a contrary effect. I am far from convinced that the Government is right in that respect. However, I am not convinced that the plaintiff is correct. As I read the law and regulations and the decisions, it is not necessary that I decide that particular phase of this case.

As I see it, the plaintiff is not within the language of the exemption. Under the holding of Helvering v. Ohio Leather Company, 317 U.S. 102, 63 S.Ct. 103, 87 L.Ed. 113, the plaintiff has failed to show that there was a written contract executed by plaintiff prior to May 1, 1936, or by any predecessor of plaintiff prior to May 1, 1936, which contained a provision as required dealing “with the disposition of earnings and profits of the taxable year,” or providing that a portion of the earnings and profits of the taxable year or at all “be paid within the taxable year in discharge of a debt,” or “be irrevocably set aside within the taxable year for the discharge of a debt.”

The decision of Rogan v. Walter Wanger Pictures Company, 9 Cir., 143 F.2d 459, is, as I read it, opposed to the contention of plaintiff. Under the decisions it was the burden of the plaintiff to show that it was strictly within the terms of the provision before it could be entitled to recover in this action. A proceeding of this kind depends upon the language of the law involved. There is no room for consideration as to what the law should have been. To me, the conclusion is inescapable that the plaintiff has failed to sustain the burden on the merits, irrespective of the question of whether the plaintiff is or is not entitled to maintain the action at all.

The decision, therefore, is that the action shall be dismissed.


source: Caselaw Access Project

author: KALODNER, District Judge.

license: Public Domain

text:
    GUETTEL et al. v. PHILADELPHIA WARWICK CO. et al.
    Civ. No. 4973.
    District Court, E. D. Pennsylvania.
    Aug. 8, 1945.
    Shulman, Shulman & Abrams, of Chicago, Ill., and Morton J. Sablosky, of Philadelphia, Pa., for plaintiffs.
    Wolf, Block, Schorr & Solis-Cohen, of Philadelphia, Pa., for defendant Philadelphia Warwick Co.
    David Bortin, of Philadelphia, Pa., for defendants Herman M. Watkins and Gabriel Wilson.
    Evans, Bayard & Frick, of Philadelphia, Pa., for defendant Tradesmens Nat. Bank & Trust Co.
   KALODNER, District Judge.

Plaintiffs, Jennie Guettel and J. C. Kreu-ger, each own a $250 debenture bond and six shares of stock of the Philadelphia Warwick Company, which owns and operates a hotel-apartment house in the City of Philadelphia. The intervening plaintiff, Philip K. Herr owns $4500 of the debentures of the Philadelphia Warwick Company and 108 shares of its stock. There is presently outstanding a total of $1,967,850 of the debentures and 47,691 shares of its stock. It may be stated parenthetically there were 24 shares of stock issued for each $1000 of debentures.

Plaintiffs, Guettel and Kreuger, filed a complaint on July 3, 1945 seeking a temporary injunction restraining the Corporation and Watkins and Wilson, two of its officers and principal security holders, as well as the Tradesmens National Bank and Trust Company, indenture trustee, from taking any steps to carry out a plan to modify the terms and conditions of the indenture and from consummating a proposed $1,400,000 mortgage on the hotel property. The complaint asked further equitable relief as will subsequently appear. At the hearing July 30, 1945, the plaintiffs withdrew their prayer for a temporary in-' junction, and it was agreed by the parties that the matter should be treated as upon final hearing. After the plaintiffs presented their testimony, the defendants moved to dismiss on the ground that a cause of action had not been established.

Upon consideration of the pleadings, testimony, and the arguments of counsel, I make the following findings of fact:

1. The plaintiffs, Jennie Guettel and J. C. Kreuger, are holders of debentures in the principal amount of $250 each and voting trust certificates for six shares of common stock each of the defendant, Philadelphia Warwick Company, hereinafter called the company.

2. The intervening plaintiff, Philip K. Herr, is a holder of debentures in the principal amount of $4500 and voting trust certificates for 108 shares of common stock of the company.

3. Plaintiffs, Guettel and Kreuger, are residents of Illinois. The intervening plaintiff, Herr, is a resident of Pittsburgh, Pennsylvania. Defendant, company, is a corporation of Pennsylvania. The individual defendants are residents of Philadelphia, and the defendant, Tradesmens National Bank & Trust Company, is a corporation of the United States having its principal office and place of business in Philadelphia, Pennsylvania.

4. The company was reorganized in 1936 or 1937 under Section 77B of the Federal Bankruptcy Act, 11 U.S.C.A. § 207, pursuant ,to an amended plan of reorganization dated January 20, 1936 amending the original plan of reorganization dated June 1, 1935, promulgated by the company which was accompanied by a letter of the company to the holders of the then securities secured upon the property of the company, said letter being dated June 8, 1935.

5. Said letter of June 8, 1935 purported to explain the proceedings, the history of the company and the proposed reorganization plan and had annexed thereto, a statement of Assets and of Liabilities and Capital of February 28, 1935 and a Pro Forma Balance Sheet as at March 1, 1935 after giving effect to the proposed reorganization plan.

6. The individual defendants, Herman M. Watkins and Gabriel Wilson, were not responsible for any of the statements made by the company or other persons in respect to the said original or the said amended reorganization plan of the company.

7. Said letter of June 8, 1935 did not purport to be a part of the original plan, nor did it purport to constitute or contain conditions which would be binding upon the company in respect of the plan that would finally be adopted by the company and approved by the required security holders •and by the Court.

8. It was not the intention of the company or of any of the parties in interest, or of the Court, that the said letter of June 8, 1935 or anything other than .the terms of the amended reorganization plan should be binding upon the company or any of the parties.

9. Said letter of June 8, 1935 stated, among other things, that the amended plan of reorganization provided for .the issuance of unsecured debentures to'the amount of two million dollars and Voting Trust Certificates for Common Stock, both of which were to be distributed in specified ratios in exchange for Class B and Class C bonds theretofore outstanding and secured upon the company’s property.

10. Said letter of June 8, 1935 also stated that it was considered inadvisable to secure the debentures by a mortgage, not only because it would have a new loan which might be needed for refinancing, but also a new loan which might be needed “otherwise.” It was, therefore, contemplated that a new mortgage might be needed for any purpose.

11. Said letter of June 8, 1935 also stated that a Voting Trust was provided in order to prevent practical control by speculators acquiring “less than a majority of the stock”. The individual defendants acquired more than a majority of the debentures and stock, in fact, more than eighty percent.

12. Neither in the Amended Reorganization Plan nor in any of the other instruments was there any prohibition against the normal right of the company to borrow money in any amount and secure the same by a mortgage on its property except that notice was required to be given to the debenture holders and if, within a specified time, the holders of twenty-five percent of the debentures outstanding did not object, such mortgage could be made and the Voting Trust Agreement provided in respect to such new mortgage loan that the stock could not be voted by the trustee in favor thereof unless notice were given to and objection not made by the holders of certificates, representing a specified percentage of the stock.

13. The Voting Trust Agreement provided that it could be terminated at any time upon the agreement of the holders of Voting Trust Certificates representing more than fifty percent of the stock of the company held in the Voting Trust. After the individual defendants acquired their debentures and stock, the Voting Trust Agreement was so terminated.

14. There was no evidence that the company did not properly approve a proposed mortgage loan of $1,400,000 to be secured upon its property.

15. The purpose of the company to use the proceeds of the mortgage loan to make payment on account of the principal outstanding debentures or to purchase debentures was not improper or inadvisable.

16. There is no evidence that the proceedings of the company to increase its authorized indebtedness was improper or inadvisable.

17. The amended plan of reorganization provided that the indenture governing the debentures should contain, and it does contain, provisions, among others, for amendment of the terms and conditions of the debentures and indenture with the written consent of the holders of two-thirds of the principal amount of the debentures outstanding.

18. There is no evidence that the proposed amendment of the debentures and indenture of the company is in any way improper or inadvisable or not approved by the holders of the required amount of debentures.

19. Both the amended reorganization plan and the indenture provided that debentures may be purchased by the company and intended that the proceeds of' any new loans or refinancing operation might be used to purchase debentures for cancellation or for payment pro rata on-all debentures.

20. The proposed mortgage of $1,400,000,, on the basis of the assets of the company,, taking into account its liabilities and its. earnings from October 1, 1935 to June 30, 1945, and all other evidence presented, constitutes a reasonable, financial operation for the company, and such mortgage loan can be supported by the company, in view of' the use to be made of the proceeds for the retirement of liability of the company upon the debentures.

21. The terms of the new mortgage are-substantially more favorable in that the rate of interest therein specified is four percent per annum, while liability of the company for interest on the debentures is. accruing and will continue to accrue at the-rate of six percent per annum.

22. There is no evidence that the former officers and directors of the company entered into any scheme with the individual' defendants or any one else, or that there-was any scheme by the individual defendants or any of the other defendants or any other persons whatever, to enable the individual-defendants or any other persons-to become the dominant stock and bondholders of the Company nor is there any evidence of any other scheme, as alleged', in the bill of complaint.

23. There is no evidence that there was. any fraudulent or otherwise unlawful, improper termination of the Voting Trust Agreement.

24. There is no evidence that the sale-of the debentures and stock of the company to the individual defendants was for any purpose other than the desire of all persons-having to do with the selling to enable them- and all other security holders to obtain a price which they regarded as favorable for their debentures and stock; said price being-80%% of par as compared with prior market prices of 43% to 60% of par.

25. There is no evidence of any fraudulent, unlawful or improper proceedings to. effect a mortgage on the property of the company, to effect any amendment of the-indenture governing the debentures, or to-do any other thing in respect to the company.

26. It was not unlawful or improper for the former holders of debentures and Voting Trust Certificates to sell the same to the individual defendants, and there is no evidence of any unlawful or improper act, scheme or intention in respect to such sale or purchase.

27. There is no evidence of any act, scheme or intention on the part of any of the defendants or any other persons to do anything in their respective capacities as officers, directors, debenture holders, stockholders or otherwise, in respect to the company, its debentures, stock or its interest generally, which may be unlawful or improper.

28. There is no evidence that the purpose of the proposed mortgage loan is not for the benefit of the security holders other than the individual defendants, but on the contrary, the same is for the benefit of all of the debenture holders and stockholders of the company.

29. All of the actions referred to in the proceedings as taken or contemplated to be taken by the company or by its officers or directors or by any of the individual defendants or the'trustee defendant were and are lawful and proper and in conformity with and in pursuance of.the provisions of and the rights allowed by the amended reorganization plan, the indenture and the debentures issued thereunder and the Voting Trust Agreement.

30. That Tradesmens National Bank and Trust Company, indenture trustee, is not and never has been the agent of Herman M. Watkins and Gabriel Wilson, or of any other officers, directors, stockholders or debenture holders of Philadelphia Warwick Company.

31. That Tradesmens National Bank and Trust Company, indenture trustee, did not co-operate with Herman M. Watkins, Gabriel Wilson, or either of them, in any purchase of debentures or stock or voting trust certificates of Philadelphia Warwick Company.

32. That Tradesmens National Bank and Trust Company, indenture trustee, did not co-operate with any other stockholders, debenture holders, or any other person whatsoever, in the purchase of debentures, stock or voting trust certificates of Philadelphia Warwick Company.

33. That Tradesmens National Bank and Trust Company, as indenture trustee and under the provisions of Article VII and Article VIII thereof, is required to comply with any changes made under said sections, upon proof of compliance with the terms thereof on the part of Philadelphia Warwick Company.

34. That Tradesmens National Bank and Trust Company, indenture trustee, has no connection whatever with the proposed increase of indebtedness of Philadelphia Warwick Company, and is not a necessary party to any such proceedings.

35. That Tradesmens National Bank and Trust Company, indenture trustee, has no connection with any proposed mortgage of $1,400,000, or any ofher proposed mortgage to be made by Philadelphia Warwick Company.

Discussion

Since a special meeting of the shareholders of the defendant, Philadelphia Warwick Company, has been called for August 11, 1945 to act upon a proposal to increase the authorized indebtedness of the corporation to $5,000,000, and further since the complainants seek to restrain the corporation from consummating the proposed $1,400,000 mortgage on the hotel property scheduled for settlement August 15, necessity for prompt disposition of the defendants’ motions to dismiss precludes an exhaustive discussion.

In support of their application for relief, the plaintiffs urge

(a) that the proposed $1,400,000 mortgage would be prejudicial to the interest of the debenture holders.

(b) that the proposed $1,400,000 mortgage is “unnecessary for corporate purposes” and that a corporation may not borrow funds and mortgage its property when such funds are not necessary for corporate purposes.

(c) that the company’s earnings will not permit it to meet annual amortization requirements imposed by the proposed mortgage.

(d) that defendants, Watkins and Wilson, acquired majority of debentures and stock control by “unfair means”.

(e) that the defendants failed to make available to the stockholders and debenture holders material and adequate information as to the operations of the company or the value of its securities.

(f) that the termination of the Voting Trust Agreement was unfair and illegal.

(g) that the modification of the terms of the indenture was illegal.

(h) that the debenture holders will suffer deprivation of presently due accumulated interest.

The Findings of Fact adequately dispose of the plaintiffs’ contention as above stated. The plaintiffs have utterly failed to substantiate by their evidence the allegations in their complaint. Finally, the plaintiffs’ own testimony established that the company intends to use the proceeds of the $1,400,000 mortgage Joan to either make payment on account of the principal outstanding debentures or to purchase the debentures by calling for a tender to the company. Of this it might be stated that in conformity with the Amended Plan of Reorganization of 1936, the Indenture Article VII, Section II, gives the company the right to borrow funds on mortgage subject to certain provisions as stated in Finding of Fact No. 12. Also Section V of Article III of the indenture entitled “Redemption from Proceedings of Loans” evidences the original intention in the Amended Reorganization Plan of 1936 to enable the procedure now contemplated by the company with respect to utilization of the proceeds of the proposed $1,400,000 mortgage.

With respect to the proposed mortgage, the directors of the company have after consideration determined that the refinancing is in the best interest of its shareholders. There is no evidence that the directors failed to act in good faith and with diligence, care and skill and honest judgment. It is well settled that the Court will not interfere with the internal management of corporation, and therefore will not substitute its judgment for that of the officers and directors. Bowman v. Gum, Inc., 1937, 327 Pa. 403, 193 A. 271.

Finally, there is no merit in the plaintiffs’ contention that debenture holders face loss of accumulated unpaid interest. The record discloses that there has been no change in the original undertaking and liability to pay debenture holders accumulated unpaid interest.

In consonance with the above, I state the following conclusions of law:

1. The debentures, indenture, Voting Trust Agreement, Voting Trust Certificates, and Certificates of Stock, are the instruments which, in addition to the applicable laws of the Commonwealth of Pennsylvania, fix the rights and obligations of the parties under the reorganization, these instruments having been made and issued under the Plan, and the provisions of the latter having been merged therein.

2. The instruments and certificates mentioned above are consistent with and conform to the provisions of the Amended Plan of Reorganization.

3. The proposed mortgage loan of $1,400,000 of the company,, the proposed amendment of the Debentures and Indenture, the proposed increase of the authorized indebtedness to $5,000,000, and the termination of the Voting Trust, were and are lawful and proper and within the rights and powers of the parties exercising or proposing to exercise the same, under the laws of the Commonwealth of Pennsylvania, and the said instruments and certificates made or issued under the reorganization plan.

4. The burden of proof of any unlawful act, committed or imminent, by any of the parties defendant, or any other persons in connection with any of the proceedings mentioned above, rested upon the plaintiffs, and the plaintiffs have failed to meet such burden of proof.

5. The transaction by which the individual defendants acquired a large majority of the Debentures or Voting Trust Certificates or Stock of the company consisted merely of a sale by the prior holders thereof to the individual defendants.

6. The individual defendants had the lawful right to purchase Debentures and Voting Trust Certificates of the company to any amount, and the sellers had the lawful right to sell the same, and thereafter the purchasers possessed all the rights, as owners of said securities, given by law and by the instruments and certificates mentioned above.

7. The individual defendants, as the purchasers of the Debentures and Voting Trust Certificates, lawfully and properly obtained the rights incident to the amount of such respective securities which they acquired, namely, as the holders of an amount in excess of eighty percent of each of said classes of security.

8. Plaintiffs failed to meet the burden of proof, in that they failed to produce any evidence, of any scheme, fraudulent or otherwise, on the part of any of the defendants, or any officers or directors or others connected with either of the defendant corporations, in respect to the company or any of its debentures, stock or otherwise.

9. The plaintiffs failed to meet the burden of proof, in that they failed to present any evidence, that the individual defendants have used, or propose to use, any of the assets of the corporation for their individual use or benefit, or for the individual use or benefit of any other person or persons, but, on the contrary, the evidence presented by the plaintiffs establishes that any use of the assets of the corporation will be and are required to be for the pro rata benefit of all debenture holders and the pro rata benefit of stockholders, according to the respective legal priorities of said two classes of securities.

10. Plaintiffs have failed to meet the burden of proof, in that they did not produce evidence, that the proposed mortgage loan of $1,400,000 was not the exercise of sound judgment and was in violation of any of the provisions of the applicable instruments or of law, but, on the contrary, the evidence produced establishes that said proposed mortgage loan can be readily supported by the company, and will constitute a reasonable financial operation.

11. The letter of January 8, 1935, accompanying the original proposed Plan of Reorganization, did not constitute representations by the company, but only a statement of the purposes and an analysis of the proposed terms of the Plan.

12. Plaintiffs have failed to meet the burden of proof, in that they have failed to establish, that any statements contained in the company’s letter of January 8, 1935 were in fact then false, or now not true, or that there has been any violation of any such statements.

13. Plaintiffs have failed to meet the burden of proof, in that they have failed to establish by any evidence that there has been any fraudulent or other scheme or violations of any rights of the plaintiffs or any persons in the same position as the plaintiffs, or that there has been or is imminent any wrongdoing of any kind by any of the defendants, as alleged in their Complaint or otherwise.

14. That no cause of action has been established against Tradesmens National Bank and Trust Company, indenture trustee.

15. That Tradesmens National Bank and Trust Company, indenture trustee, is not a necessary party to any transactions involving the indenture dated as of March 2, 1936, under which debentures have been issued to holders of old B and C Bonds of Philadelphia Warwick Company.

16. That Tradesmens National Bank and Trust Company, indenture trustee, has not done or permitted any acts, or participated in any acts, on the part of the Philadelphia Warwick Company, or any of its officers, directors, stockholders or debenture holders, with respect to a proposed increase in indebtedness or the execution of a mortgage in the sum of $1,400,000 by said Philadelphia Warwick Company.

In accordance with the above, the plaintiffs having failed to establish a cause of action, the defendants’ motions to dismiss must be and they are hereby granted; plaintiffs to pay the costs.

An order may be submitted in accordance with this opinion.


author: HINCKS, District Judge.

text:
    KEEFE v. GORA et al.
    Civil Action No. 733.
    District Court, D. Connecticut.
    Aug. 10, 1944.

      Rockwell & Bartholow, by Edmond M. Bartholow, all of New Haven, Conn., and Kwis, Hudson, Boughton & Williams, by A. J. Hudson and W. E. Williams, all of Cleveland, Ohio, for plaintiff.
    Fitzgerald, Foote & Fitzgerald, by Jeremiah D. Shea, all of New Haven, Conn., and Cameron, Kerkam & Sutton, by Loyd H. Sutton, all of Washington, D. C., for defendant.
   HINCKS, District Judge.

This action under R.S. § 4915, 35 U.S. C.A. § 63, has been brought as a result of two interferences between the parties hereto in the Patent Office, viz., No. 76,583 and No. 76,584, each comprising three claims. The Patent Office awarded priority to Gora, one of the defendants herein and assignor to the co-defendant Jenkins Brothers, and on Gora’s application, Serial No. 134,863, filed April 3, 1937, patent No. 2,293,132 was issued on August 18, 1942, including all the claims in interference.

The subject matter of the controversy lies in the field of air valves — such valves as are used to hold the air in the inner tubes of motor vehicle tires. More particularly, the field is confined to so-called capless valve assemblies having removable and replaceable cores. In this field, it should be explained, “capless” valve means ■one which does not contemplate the use of a detached cap screwed manually upon the nipple of the stem, to exclude dirt.

Findings

1. The prior art showed capless valves ■in which the core is not removable, e. g., defendants’ Exhibit 21. In these a cap permanently fixed on the outer end of the pin of the core was so dimensioned and disposed that when the valve was in closed position the pin-cap substantially filled the orifice of the tubular stem and thus prevented the admission of dirt and moisture — a function which in older valves had been accomplished by screwing a detached cap upon the nipple of the stem which was exteriorly threaded for that purpose.

2. The prior art also showed a wide variety of valves with removable cores but without device other than the detached cap of the older art just described to prevent the admission of dust. The valves of this type which had the widest commercial use all depended upon the cooperation between a core and the tubular insert or ferrule of a stem in which the core was seated. The core included a tubular barrel, the exterior of which carried cir-cumferentially a band of packing material which served to prevent the passage of air between the core and the stem when the core was suitably seated against interior shoulders of the tubular insert of the stem. Through the barrel, and constituting a part of the subcombination of the core, extended a pin at the inside end of which was permanently fixed a valve device consisting either of a cup or tapered cone which in cooperation with the bottom of the barrel served as a seal to prevent the passage of air through the barrel. Above and outside the barrel was a tubular plug, generally swiveled into the top of the barrel, threaded on the exterior to cooperate with the interior threading on the metal insert of the stem. In some, at the top, or outer, side of the plug its side walls were extended to form two lugs each diametrically opposed to the other. In others, the plug, instead of terminating in two lugs as just described, was surmounted by a bar or bridge across its diameter; in this construction the bridge was aper-tured to permit the passage and reciprocation of the pin. In one form at least, e. g., the Bridgeport Brass Company valve, the entire side walls of the plug except for the two sections thereof which supported the bridge were cut away so that it was shaped like a slab instead of a tube; but this like the others was threaded on the exterior of the side wall sections supporting the bridge. In all these valves the pin was actuated by a spiral spring surrounding the pin and located inside the barrel or above or below the barrel, which in the absence of opposing (inward) pressure held the valve device on the inner end of the pin in closed position, leaving the outer end of the pin projecting into the tubular orifice of the stem with the tip of the pin just inside of the plane of the lip of the stem-nipple which, as observed above, was generally threaded on the exterior to accommodate a detached dust cap to exclude dirt from the chamber of the insert and the barrel beneath it.

3. In the type of valves just described to accomplish the assembly of the overall combination, the core was manually inserted into the insert of the stem. A valve tool was then required so designed that its working end could be inserted into the insert of the stem and by engagement between cross-slots in the valve tool and the lugs or bridge of core-plug screw the plug into the insert and thus bring the packing-band on the exterior of the barrel into a sealing position against the shoulders of the insert. A detachable dust cap, such as Exhibit 64, often served as this valve-tool, so designed that its top was drawn into a tube dimensioned for insertion into the orifice of the insert and cross-slotted for engagement with the lugs or bridge of the plug.

4. The claimed inventions which came into interference as aforesaid proposed a modification of the structures described above whereby the outer end of the pin terminated in a cap, like the cap on the pin of the non-removable core described in Paragraph 1 above, permanently and rigidly affixed thereon so dimensioned and positioned that with the valve closed the pin-cap would substantially fill the mouth of the stem and thus exclude dirt and moisture from admission into the chamber of the insert and the barrel of the core. This feature of the claimed invention obviated the need for the detached dust-cap of the older art which was objectionable in that it had to be removed every time the tire was inflated and due to the hazard of loss frequently left the device exposed to the admission of dirt affecting the effectiveness of the air seal.

5. The modification just described, however, created a mechanical problem. For the new cap on the modified pin served not only to close the chamber of the insert to dirt but also precluded the insertion of the valve tool described in Paragraph 3 above which theretofore had been the conventional means of screwing the plug into the insert and thus bringing the core into its operative position. To meet this difficulty, the plaintiff conceived an arrangement whereby (1) a pair of lugs were fashioned on the inner face of the expanded pin-cap and (2) a slot suitable for screw driver or similar tool was machined on the outer side of the pin-cap. And the defendant’s conception was the same except that instead of lugs on the inside of the pin-cap he used a slot.

6. To operate these modified devices, it was thus necessary against the pressure of the spring to push the pin-cap inward until the lugs or slot on its inner face were in position to engage or mesh the lugs or bridge on the top of the plug. This accomplished, all that remained was to impart a rotary motion to the plug through the pin-cap, thus screwing the core into position. And the application of the necessary force, first in an axial then in a tangential direction, could conveniently be accomplished through a screw driver or similar tool properly dimensioned for insertion into the mouth of the stem.

7. For purposes of inflation and deflation when the core is screwed into operative position, in order that the passage of air might not be obstructed by the modified pin-cap both plaintiff and defendant provided, as a part of their claimed invention, that the chamber inside the mouth of the insert or stem in which the pin-cap reciprocates should be recessed so that, except when the valve is in closed position with the pin-cap closing the mouth of the stem, there should be ample room for the passage of air around the pin-cap. Thus when the pin-cap is pushed inward by an air-chuck the air may pass around the pin-cap and through the barrel into the tire.

8. I find, as the Patent Office found, that the plaintiff conceived his claimed invention as early as July 14, 1936.

9. I find, as the Patent Office found, that the defendant Gora conceived his claimed invention as early as August, 1936, and that he failed to prove any earlier conception date.

10. Not later than July 14, 1936, the plaintiff incorporated his conception into a model core, Plaintiff’s Exhibit C, and a model stem, Plaintiff’s Exhibit D. This model core was made by accomplishing a modification of a commercial specimen of the Dill core — a type of valve which had theretofore by wide commercial use been proved to be entirely operable. To the outer end of the pin on this core, the plaintiff soldered a cap upon the inner face of which two lugs, diametrically opposed, were fashioned. And the outer face of this cap was slotted. (That this cap was fashioned from a Dill plug part explains the peculiar appearance and form of the model but is without legal significance.)

11. The Patent Office accepted the proofs showing that this model was made not later than July 14, 1936, as establishing that as the date of conception. With that finding I am entirely in accord.

12. On March 31, 1937, the plaintiff filed his application, Serial No. 134,114, for a claimed invention in this field.

13. On April 3, 1937, Gora filed his application Serial No. 134,863, upon which after the interference proceedings Patent No. 2,293,132 issued on August 18, 1942. This application and patent included the six claims in interference.

14. On October 19, 1938, plaintiff filed his application Serial No. 235,836 in which he included the six claims in interference-as suggested by the Patent Office.

15. The plaintiff contended in the interference proceedings as at the trial herein that his 1937 application (Paragraph 12, supra) disclosed the invention defined by the claims in interference and thus served as a constructive reduction to practice. This contention was one which was overruled by the Patent Office, and upon which, in my view of the other features of the case, there is no need for me to rule. The plaintiff also contended that the manufacture of the models, Exhibits C and D, as described in Paragraph 10 above, as early as July 14, 1936, in itself, or at least when shortly thereafter followed by a manual insertion of the core (Exhibit C) into the insert (Exhibit D), constituted a reduction to practice as a result of which he was entitled to an award of priority over Gora. The Patent Office overruled this contention also. And while this issue also becomes moot if I am right in my ultimate conclusion that the plaintiff’s disclosures fail to show patentable invention, nevertheless, since the issue relating to the priority of the rival applicants furnished the chief controversy at the trial, I will state my views thereon.

Opinion.

The Patent Office held that this model, Exhibits C and D, without testing under service pressures when assembled was insufficient in itself to constitute a reduction to practice, and that consequently the mere assembly of Exhibit C into Exhibit D by the application of the thumbnail to the slotted pin-cap was insufficient. For aught that appeared in the proofs, when the core, Exhibit C, had apparently been fully seated in the insert by the thumbnail, it might not in fact have been seated with sufficient firmness to prevent leakage between the barrel and the stem. And so it was thought that a test under pressure was necessary to reduce the device to practice. With that ruling I am unable to agree.

For the core of the model was a commercial specimen of a type the operability of which had already been fully tested under service pressures by widespread public use. Obviously the cap on the outer end of the pin could not affect the air seal accomplished by the cooperation between the barrel and the valve cap on the inner end of the pin. For these two parts which alone accomplished the air seal and the means for their cooperation were present in the model precisely as they were in the commercial specimen. A pressure test of the seal between valve-cup and barrel was therefore wholly superfluous.

I think it was also unnecessary to test the models for the air seal between the core and the stem. For here, too, widespread practical use had demonstrated that the Dill core could be screwed into a cooperating stem or insert with sufficient firmness to be airtight, and hence operable, through the use of a simple valve tool, or a nipple cap, such as is in evidence as Exhibit 64. And it is, I think, mechanically obvious that a rotary movement could be imparted to the plug by the pin-cap of the model, Exhibit C, as well as by a valve tool such as plaintiff’s Exhibit 64.

The Patent Office ruling apparently implies that possibly the mechanical means present in the model were inadequate for the application of sufficient force to screw the core firmly into place. But I should suppose that the sufficiency of a force, applied as here in a circumferential or tangential direction, would depend upon the length of the diameter of the circular part receiving the force and the length of the blade-edge of the screw driver or similar contemplated tool which is used to impart or transmit the force. Here the parts receiving the force are, directly, the pin-cap (through its outer slot) and, indirectly, the plug with its lugs (through the pin-cap). The plaintiff’s model has a plug of the same diameter and hence the same capacity to receive force as the commercial core of proved operability; For the model is a commercial core. And the pin-cap of the model is so dimensioned that by visual inspection its slotted diámeter is seen to be substantially as long as the diameter of its plug. Thus the two parts of the model which receive the force have the same mechanical means and capacity to receive force as the tested commercial specimen. And the core of the model even when inserted in the stem obviously is adapted to cooperate with a tool having as much capacity to impart force as the tools of tested operability. For into the mouth of the stem a screw driver may be inserted having a blade-edge as long as the diameter of the older valve tool.

And even if the slot on the pin-cap were somewhat shorter or if through the indirect transmission of force by the model there should be some leakage as from friction, any shortage of force thus resulting could readily and obviously be compensated for either by a more generous output from the fingers or by a bigger handle on the tool without the slightest modification of the model. In other words, the model, like the conception which underlies it, contemplates the application of sufficient force for its operability and contains mechanical features fully adequate for that application.

The defendant attempts to support the ruling of the Patent Office by the contention that the model, Exhibit C, has not been shown to have sufficient structural strength to be operable. It is true that the cap was merely soldered to the pin in the model and, for aught that appears, due to the soft material used its slot might not stand enough pressure from a screw driver to firmly seat the core and accomplish the desired seal. But as to this, it must not be forgotten that the claimed invention does not purport to extend to the materials used or to the manner or means whereby the cap is fashioned or ^ffixed to the pin. The fact is that the model actually carried mechanical means of obvious sufficiency in the light of commercial practice for operability. That being so, the strength of the model was immaterial and there was no need for a pressure test to reduce to practice.

Even though a high degree of proof be required to establish the priority of an inventor, the patent law is not so technical, as to require him to demonstrate the obvious. For the purpose of determining; whether practical tests are essential to accomplish a reduction to practice, the cases: may be assigned to three classes according; to their facts.

“The first includes devices so simple and' of such obvious efficacy that construction: of one of a size and form intended for, and capable of practical use, is held sufficient without tests in actual use. The second consists of those where a machine embodying every essential element of the-invention, having been tested, and its practical utility for the intended purpose demonstrated to reasonable satisfaction, has been held to have been reduced to practice, notwithstanding it may not be a mechanically perfect machine. The third class includes, those where the machine is of such a character that the particular use for which it is intended must be given special consideration, and require satisfactory operation in the actual execution of the object.” Sherman v. American Telephone & Telegraph Co., D. C., 38 F.Supp. 360, 364; affirmed. 2 Cir., 132 F.2d 321.

The case here, unlike the Sherman case,, falls within the first class above described, and if the point required a ruling I should! feel constrained to hold that the plaintiff not only conceived his claimed invention but also reduced it to practice in July, 1936, and hence was entitled to an award of priority.

It does not follow, however, that the plaintiff is thereby entitled to a decree-herein authorizing the issue of a patent.. For it has long been established that in actions under R.S. § 4915, even when as-here the only issue directly raised by the parties is that of priority, the court will not order the issue of a patent unless-satisfied that the claims involve patentable invention. Hill v. Wooster, 132 U.S. 693, 10 S.Ct. 228, 33 L.Ed. 502; Sinko Tool Co. v. Automatic Devices Corporation, 2 Cir., 136 F.2d 186. And I can find no such: invention in the claims here involved.

The plaintiff was posed, or posed himself, with the problem of providing a dust guard on the conventional tire valve with removable core. Surely, the notion of Flocking the mouth of the stem was the obvious first step. Nor can it be said to involve any trace of true invention to accomplish this by a cap on the conventional valve pin, especially in view of the earlier •and successful application of this solution to the valve without a removable core. Of all the parts of the core, the tip of the pin was in closest proximity to the ■mouth of the stem which it was desired to close, and the reciprocatory movement ■of the pin in the conventional valve made it more eligible than any other element ■of the core as a mount for such a closing ■cap.

With the head once located on the tip of the pin, all that remained was to contrive means to accomplish the rotation of the plug beneath under sufficient pressure to screw it into the insert. Heretofore this had been accomplished by the direct application of a valve tool equivalent to a specially adapted wrench. But now that the plug, due to the interposition of the enlarged pin-cap, could not be reached by the conventional tool, it lay in the field of mechanical skill rather than invention to accomplish the desired result by an indirect transmission of the required force. For, surely it is a practice well known to ■skilled mechanics to reach inaccessible parts thus indirectly. Thus to conceive the use of the pin-cap adapted to serve as an intermediate tool for the transmission of the ■necessary force, at least in the light of recent decisions, seems a solution too obvious to classify as patentable invention.

To be sure, a successful solution had to be adjusted to the reciprocatory movement of the pin. The axial position of the pin-cap when used as a wrench to screw the plug into place necessarily marked the inner limit of the reciprocatory movement of the pin: the outer limit of that reciprocatory movement must simultaneously leave (1) the pin-cap at the very lip of the stem-mouth if it was to serve as a seal against dust and (2) the valve cup on the inner end of the pin in contact with the barrel to close the valve. But the pin of the conventional valve already had a reciprocatory motion: To accomplish this new result all that was needed was a proper dimensioning of the pin and its cap in relation to the other cooperating parts. And of course the lugs or slot on the inner face of the pin-cap had to be designed properly to mesh with the lugs or bridge of the plug beneath; also, the diameter of the pin-cap had to be dimensioned for its relation to the diameter of the tubular stem. All told, the problems involved were largely problems of mechanical design and the plaintiff’s solution required less invention than that involved in the Mead patent which was held to be wholly lacking in patentable invention by the Supreme Court in Cuno Engineering Corporation v. Automatic Devices Corporation, 314 U.S. 84, 62 S.Ct. 37, 86 L.Ed. 58. And the fact that the Patent Office had allowed the claims in interference (in 1936) before the Cuno decision had been reported (in 1941) somewhat mitigates my natural diffidence in taking a position at variance with the Patent Office.

I conclude therefore that the plaintiff’s disclosure lacks patentable invention and that his action should be dismissed with costs.

A decree accordingly may be submitted, on notice unless notice is waived.


author: WATSON, District Judge.

text:
    VISINTAINER v. HAZLETON AUTO BUS CO. et al.
    No. 1443.
    District Court, M. D. Pennsylvania.
    July 21, 1945.

      Felix W. Bolowicz, of Wilkes Barre, Pa., for plaintiff.
    James W. Scanlon, of Scranton, Pa., for defendant, Hazleton Auto Bus Co.
    John H. Bonin, of Hazleton, Pa., for defendant, Andrew Krasko.
   WATSON, District Judge.

This action was commenced on August 7, 1944 by Madelon Visintainer against the Hazleton Auto Bus Company and Andrew Krasko to recover damages for personal injuries. It is alleged in the complaint that Madelon Visintainer at the time the suit was commenced was a citizen of the State of New York and that the two defendants are residents of the State of Pennsylvania.

The defendant, Hazleton Auto Bus Company, has moved to dismiss the action for the reason that the plaintiff was not a resident or citizen of the State of New York, but was a citizen and resident of the State of Pennsylvania and, therefore, there being no diversity of citizenship this Court is without jurisdiction. It is conceded that the defendants were citizens and residents of the State of Pennsylvania.

The question is, Was the plaintiff, Made-lon Visintainer, a citizen of the State of Pennsylvania on August 7, 1944 when thé suit was commenced? If she was, this Court is without jurisdiction.

Depositions were taken, the witnesses being the plaintiff, Madelon Visintainer, Mr. T. Jaques Lancaster, a prospective employer of the plaintiff, and Miss Louise Ghezzi, an aunt of. the plaintiff. Plaintiff testified that, prior to February 1944, she lived with her parents in Drums, Pennsylvania; that, from February 1944 to June 1944 she worked for the Petroleum Administration for War in Washington; that she took a temporary leave from her job, and about July 2d, went to New York City where she remained until August 22d; that she left New York City to return to Drums because her mother was ill; that she returned to New York in December 1944 and had lived there up to the time of the taking of the depositions. Mr. T. Jaques Lancaster testified that the plaintiff’s application for work in New York City had been accepted and that she was hired but that she never worked for him, either during her first or second visit in New York. Miss Louise Ghezzi testified that, during the period of July 2, to August 22, 1944, the plaintiff lived with Miss Ghezzi in the home of Miss Ghezzi’s fiance during the family’s absence on vacation, and that, since plaintiff’s return in December, plaintiff has stayed with her cousins.

The term “citizen”, as used in the Judiciary Act, 28 U.S.C.A. § 41(1), with reference to the jurisdiction of the Federal Courts, is substantially synonymous with the term “domicile”. Delaware, L. & W. R. R. Co. v. Petrowsky, 2 Cir., 250 F. 554, 557.

It is conceded that Madelon Visintainer was domiciled in Pennsylvania when she went to New York in July 1944, and the burden is unquestionably upon her to show a change of domicile. In re Sealey v. United States, D.C., 7 F.Supp. 434.

Plaintiff testified that her trip to Washington was only a visit and that she intended to return to Drums, her home in Pennsylvania. When she went to New York in July she stayed with an aunt, paid no room rent, made an application for a job but did not work. If a visit such as this be all that is required to change one’s domicile, confusion is bound to result. There is little or no evidence that the plaintiff has in fact made her domicile in New York to uphold the burden which is upon her. The abandoning of one domicile for another means much more than a mere change of residence. It is a serious proceeding, and intention so to do should be shown by most satisfactory evidence, which does not exist here. See Earley v. Hershey Transit Co., D.C., 55 F.Supp. 981. It appears, therefore, that the Court is without jurisdiction of this action, and defendant’s motion will be granted.

Now, this action is dismissed.


author: LA BUY, District Judge.

text:
    UNITED STATES v. WAGNER MILK PRODUCTS, Inc.
    Civil Action No. 45 C 28.
    District Court, N. D. Illinois, E. D.
    July 18, 1945.
    J. Albert Woll, U. S. Atty., and J. P. Lulinski, Asst. U. S. Atty., both of Chicago, Ill., for plaintiff.
    Grablowski & Kanak, of Chicago, Ill., for defendant.
   LA BUY, District Judge.

This action is brought under the provisions of the Agricultural Marketing Agreement Act of 1937, 50 Stat. 246, 7 U.S. C.A. § 601 et seq. This court has jurisdiction under said Act to enforce, and to prevent and restrain violations of any order issued by the Secretary of Agriculture of the United States. All powers and functions of the Secretary of Agriculture were transferred to the War Food Administration, under Executive Order No. 9322, issued on March 26, 1943. This included the administration and enforcement of the Agricultural Marketing Agreement Act of 1937, and this suit was instituted at the request of the War Food Administrator.

The defendant is engaged in handling milk in the Chicago, Illinois, Milk Marketing Area and was during the times referred to in the complaint a “handler” of milk in that area as defined in Sec. 941.1(a) (5) of Order No. 41 as amended. The complaint so alleges and further alleges that this action was brought to enforce the provisions of Order No. 41 as originally issued and as subsequently amended, regulating the handling of milk in the Chicago, Illinois, Marketing Area, which is in the current of interstate commerce, or which directly burdens, obstructs or affects interstate commerce in milk or its products.

Under Sec. 941.3(a) of said Order No. 41, as amended, the market administrator in accordance with Sec. 941.8(d) of said Order, computed and rendered to the defendant a statement of its account with the producer-settlement fund for the delivery period, December, 1941, and for each monthly delivery period commencing April 1, 1943, and ending January 31, 1944, and on the basis of said reports, the defendant is indebted to the market administrator for the producer-settlement fund $3,804.60 for the delivery periods above referred to, which defendant has failed to pay; that pursuant to Sec. 941.3(b) of said Order No. 41, as amended, the market administrator audited the books and records of the defendant for the delivery periods beginning November 1, 1942, and ending January 31, 1944, and such audit disclosed errors in the reports of the defendant of its receipts and utilization of milk and errors in payments to the producer-settlement fund, and the market administrator in accordance with the provisions of Sec. 941.8 (g) of said Order No. 41, as amended, billed the defendant with the amounts unpaid by the defendant as shown by said audit adjustments, and that the defendant owes the market administrator the additional sum of $7,055.10 for the delivery period referred to.

The complaint further sets up an indebtedness of the defendant of $244.91 for its pro rata share of the expense of administrator of said Order for the delivery period commencing April 1, 1941, and ending January 31, 1944, and an indebtedness of defendant amounting to $284.54 for marketing services from April 1, 1943 and ending January 31, 1944.

The complaint requests that an injunction issue mandatorily enjoining and commanding the defendant to comply with the provisions of Order No. 41, as amended, by forthwith paying all sums found to be due and owing from the defendant to the market administrator for the delivery periods referred to in the complaint.

The defendant has filed its motion to strike the complaint on the ground (a) that the complaint fails to state a cause of action upon which relief can be granted, (b) that the- War Food Administrator of the United States has no authority under the Act to bring this action, (c) that no mandatory injunction may issue as prayed, and (d) that the complaint is not under oath.

Under the rules of civil procedure in the Federal courts, all that is required is a short and plain statement of the claim showing that the pleader is entitled to relief. A complaint must allege sufficient facts to fairly apprise the defendant of the nature and basis of the asserted claim and the relief requested. Ultimate facts and details of evidence are not required to be shown. Continental Collieries, Inc. v. Shober, 3 Cir., 130 F.2d 631; Louisiana Farmers Protective Union v. Great Atlantic & Pacific Tea Co., 8 Cir., 131 F.2d 419; Dioguardi v. Durning, 2 Cir., 139 F.2d 774.

The complaint here sets forth the basis of the cause of action, the amounts due, and all pertinent facts sufficiently to fairly apprise the defendant of the nature of the claim asserted. It is true that the complaint does not set forth in details the audit of the books and records of the defendant, with an itemization of the errors in defendant’s returns, but such particularity is not required. The defendant is in possession of its own books and records, and should be sufficiently familiar with the provisions of the Act so that it can accurately compute the amount actually due by it. There is no legal requirement that the plaintiff shall set forth all of the accounting by which the claimed indebtedness of the defendant is arrived at. If the defendant is unable to obtain the figures from its own books and records, it can take steps authorized by law to obtain such information.

The court is convinced that the complaint alleges such facts to fairly apprise defendant of the claims made and the relief sought.

The defendant further contends that the War Food Administrator has no legal authority to bring this action. An inspection of the record discloses that the action was instituted by the United States upon the request of the War Food Administrator. Under the original Act it was provided that an action such as the present action should be instituted “upon the request of the Secretary of Agriculture.” However, under the First War Powers Act, 1941, 55 Stat. 838, 50 U.S.C.A.Appendix § 601, et seq., the President of the United States was authorized “to make such redistribution of functions among executive agencies as he may deem necessary, including any functions, duties, and powers hitherto by law conferred upon any executive department, commission, bureau, agency, governmental corporation, office, or officer, in such manner as in his judgment shall seem best fitted to carry out the purposes of this title,” and under that grant of power, the President of the United States issued Executive Order No. 9280 on December 5, 1942, 50 U.S.C.A.Appendix § 601 note, authorizing and directing the Secretary of Agriculture to assume full responsibility for and control over the nation’s food program, and directing the consolidation of the functions of certain agencies of the Department of Agriculture, including the Agricultural Marketing Administrator, into an agency to be known as the Food Distribution Administrator. On March 26, 1943, the President issued Executive Order No. 9322, 50 U.S.C.A.Appendix § 601 note, by which all of the powers and functions of the Secretary of Agriculture under Executive Order No. 9280 were transferred to the War Food Administrator. This included the administration and enforcement of the Act, and it was specifically provided that such transfer shall not be subject to challenge of any third party affected by the exercise of the power on the ground that the action was within the jurisdiction of the Secretary of Agriculture rather than the War Food Administrator. Under these conditions the suit was properly brought upon request of the War Food Administrator and the contention of defendant to the contrary is not well founded and should be overruled.

The defendant further contends that the issuance of a mandatory injunction is not warranted under the allegations of the complaint. Jurisdiction is vested in this court under the Act to specifically enforce and to prevent and restrain any person from violating any order, regulation, or agreement issued under the Act. In the case of United States v. Adlers’ Creamery, Inc., 2 Cir., 110 F.2d 482, the court affirmed a decree which adjudged that the defendant be mandatorily enjoined and commanded to comply with an order issued under the Act, and particularly to pay to the Market Administrator the sum of $46,796.66, holding that the claim that it was inequitable to grant 'a mandatory injunction to collect a past due debt must yield to the statutory provision of such a remedy. Under this authority the relief requested in this complaint may be enforced.

The defendant further contends that the complaint should be verified. Under Rule XI of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, pleadings need not be verified. No temporary restraining order or relief prior to final hearing is requested by the plaintiff. Therefore, the complaint does not necessarily have to be verified.

The order of the court will be that the motion of the defendant to strike the complaint be overruled and a rule entered upon the defendant to file its answer herein.


author: KIRKPATRICK, District Judge.

text:
    TRAVELERS INS. CO. v. BRANHAM, Deputy Com’r, et al.
    Civil Action No. 4323.
    District Court, E. D. Pennsylvania.
    June 4, 1945.

      Evans, Bayard & Frick, Benjamin O. Frick, and Arthur H. Clephane, all of Philadelphia, Pa., for plaintiff.
    Gerald A. Gleeson, U. S. Dist. Atty., of Philadelphia, Pa., Charles R. Sheidy, Jr., Asst. U. S. Dist. Atty., of Reading, Pa., and Freedman, Landy & Lorry and Charles Lakatos, all of Philadelphia, Pa., for defendants.
   KIRKPATRICK, District Judge.

On July 21, 1939, John Bernatowicz, a longshoreman, sustained an injury in the course of his employment. On March 7, 1940, he filed a claim petition with the then deputy commissioner, the present deputy commissioner’s predecessor. Protracted proceedings followed including a number of hearings, review proceedings in the District Court and an appeal to the Circuit Court of Appeals. The issue throughout was whether Bernatowicz’s permanent total disability which began in February 1940 was the result of the injury, the claimant’s contention being that the injury had aggravated a pre-existing disease. The medical question presented was novel and apparently perplexing and most of the testimony was that of physicians. The net result of the proceedings was that it was finally determined that the claimant was totally disabled as a result of the accident and that such disability existed as late as March 6, 1942.

Compensation payments were continued until the death of Bernatowicz which occurred January 15, 1944. Then his widow, the present claimant, filed claim for compensation on account of her husband’s death. The insurance carrier resisted the claim upon the ground that the death did not result from the injury. The medical issues were of the same general nature as those developed in the proceedings on the claim petition. After hearing the evidence the deputy commissioner found “that the injury sustained by said employee aggravated a pre-existing diseased condition known as Buerger’s disease and hastened his death; that the death of the employee is causally related to the injury he sustained; that there is no independent intervening cause to which the death might be attributed.” This proceeding for review followed and the matter is before the Court upon the claimant’s motion for summary judgment. Taking up in order the points made by the insurance carrier against the motion, I hold as follows:

1. It was not error for the deputy commissioner to admit in evidence the transcript of testimony taken at the hearings upon the disability claim.

The Longshoremen’s Act was adopted from the New York Workmen’s Compensation Law and the Circuit Court of Appeals for the Third Circuit has decided, West Penn Sand & Gravel Co. v. Norton, 3 Cir., 95 F.2d 498, that the Act should be given the settled construction which the New York Courts had given to the New York statute prior to the enactment of the federal law. Section 923, 33 U.S.C.A., of the Longshoremen’s Act provides, that the deputy commissioner “shall not be bound by common law or statutory rules of evidence or by technical or formal rules of procedure * * * but may make such investigation or inquiry or conduct such hearing in such manner as to best ascertain the rights of the parties.” Under this section as construed by the New York courts the transcripts of testimony were clearly admissible. In addition, it is difficult to see why they would not be, by any reasonably liberal construction of the Act. True, the insurance carrier did not have an opportunity in the earlier hearings to cross-examine the witnesses upon the principal issue in this proceeding, namely the causal connection between the injury and the death, John Bernatowicz being still alive, but it could and did cross-examine fully upon the causal connection between the injury and the claimant’s condition as of that time, which was the only purpose for which the notes of testimony were offered in the present case.

2. It was entirely proper for the deputy commissioner to call the attention of the experts to a certain portion of a medical treatise of recognized authority which he had read and to ask for their opinions in the light of and with special reference to the statements therein made. Although portions of the treatise were necessarily read to the witnesses in order to interrogate them intelligently, and therefore appear in the notes of testimony, it will be noted that the commissioner did not base his findings upon the statements in the treatise itself, as independent evidence, but upon the opinions of the experts after having read and discussed those statements.

3. There was competent evidence to support the referee’s findings that Bern-atowicz, “while performing services for the employer upon the navigable waters of the United States, sustained injury; that the injury aggravated a pre-existing condition known as Buerger’s disease and hastened his death and that the death of John Berna-towicz was causally related to the injury sustained by him.” The evidence was conflicting, and from a medical standpoint the case was certainly an unusual one, arising from the fact that most of the manifestations of the disease both before and after the injury were in the right leg and foot whereas it was the left foot which was injured. However, the question is not whether this Court might have drawn a different conclusion from that of the deputy commissioner. The only matter before the Court is whether his findings are supported by evidence. I am satisfied that they are and, if so, they must be regarded as final and conclusive and not subject to judicial review.

Judgment may be entered for the defendants.