text:
    HILLSDALE GROCERY CO. v. UNION & PEOPLE’S NAT. BANK OF JACKSON, MICH., et al.
    No. 11024.
    District Court, E. D. Michigan, S. D.
    March 20, 1934.
    McLeod, Fixel, Abbott & Fixel, of Detroit, Mich., for petitioner.
    Bisbee, MeKone, Wilson & King, of Jackson, Mich. (David W. Kendall, of Jackson, Mich., of counsel), for receiver, conservator, and Union & People’s Nat. Bank of Jackson.
   KNIGHT, District Judge.

On February 14,1933, wben a bank moratorium in the state of Michigan was declared by the Governor of that state, the Union & People’s National Bank of Jackson, Mich., as trustee in the estate of the Hillsdale Grocery Company, bankrupt, had on deposit in the Union & People’s National Bank $2,526.98. This proceeding was instituted to have this deposit declared a preference and under a summary order to compel the payment thereof by the conservator. Since the conclusion of the hearings in this proceeding, the aforesaid bank was declared to be insolvent by the Comptroller of the Currency, and a receiver has succeeded the conservator. This court is asked to review and reverse the order of the referee in bankruptcy granting the prayer of the petitioner and making summary directions in the matter of enforcement.

This ease differs in certain respects from In re Battani et al. (D. C.) 6 F. Supp. 376, recently decided by me, though certain of the same questions are involved.

The funds in question were deposited in violation of General Order in Bankruptcy No. 46 (11 USCA § 53), in that the local bankruptcy eourt never authorized such deposit. No question is raised regarding this statement of fact. Such general order was not offered in evidence. The receiver for the bank asserts the eourt cannot now take judicial notice of this rule. This can hardly be considered seriously. By the very nature of its authority the court may take such notiee. The referee has found as a fact that the bank depository knew or should have known of the rule. I do not find support for this finding. But the receiver claims that the bank had the right to presume the rule had been observed. Tbe diligence of counsel has pointed to no authority which supports this position.

Section 30 of the Bankruptcy Act (11 USCA § 53) empowers the Supreme Court to make all necessary rules as to procedure and for carrying the Act into effeet. General Order 46 (11 USCA § 53) was adopted by the Supreme Court and became effective June 1, 1931. Except it conflict with the Constitution or laws, a rule adopted pursuant to authority conferred by law has tbe force and effeet of law. “A rule of tbe court thus authorized and made, has the force of law, and isi binding upon the court, as well as up-., on parties to an action, and cannot be dispensed with to suit the circumstances of any particular ease,” was declared many years ago in Thompson v. Hatch, 3 Pick. (Mass.) 512, and that statement of the law has uniformly been followed. Rio Grande Irrigation & Colonization Co. v. Gildersleeve, 174 U. S. 603, 19 S. Ct. 761, 43 L. Ed. 1103; Clawans v. Whiteford et al., 60 App. D. C. 412, 55 F.(2d) 1037; Woodbury v. Andrew Jergens Co. (C. C. A.) 61 F.(2d) 736. In B. C. L. vol. 7, 1027, cited on behalf of the receiver, we» find this significant expression: “Buies adopted by a eourt without exceeding the limits of its authority are often spoken of as having the effect of rules enacted by tbe legislature, or positive law, and tberefqre, as being obligatory on tbe eourt and on the parties.”

Section 61 of the Bankruptcy Act (11 USCA § 101) provides for the designation of a depository, “for the money of bankrupt estates,” and that such depository shall give hand. Where a banking institution was named receiver or trustee, it was not deemed always necessary that the deposits of the estate be made in a separate institution, and a hanking institution acting as trustee or receiver was authorized to hold the money on certain conditions. No. 46, General Orders in Bankruptcy (11 USCA § 53). The rule recognized the necessity of the approval of the Circuit Judges of the circuit in respect to the financial ability of depository. It provides that a majority of Circuit Judges may adopt a rule authorizing the holding- of such deposits under “such provisions for the supervision and control * * * as the court may deem adequate.” The bank as trustee occupies the same relative position as an individual. He is required by law to- deposit funds of the estate in a depositary. The bank was a designated depository, but it, like an individual, should have recognized that it could not hold its own deposits without specific authority of law. It was the bank’s business to know its right in this respect, just as it was to know it was a designated depository for other bankrupt funds. It did not do this, and by virtue o-f accepting such deposits, such deposits become ex maleficio trust funds provided the deposits are traced to and augment the assets of the bank. Hancock County et al. v. Hancock National Bank of Sparta (C. C. A.) 67 F.(2d) 421; American Surety Co. v. Jackson (C. C. A.) 24 F.(2d) 768; Board of Commissioners v. Strawn (C. C. A.) 157 F. 49, 15 L. R. A. (N. S.) 1100; Conqueror Trust Co. v. Fidelity & Deposit Co. of Md. (C. C. A.) 63 F.(2d) 833; Citizens’ & Southern Bank v. Fayram (C. C. A.) 21 F.(2d) 998; Farmers’ Bank of Alamo v. United States Fidelity & Guaranty Co. (C. C. A.) 28 F.(2d) 676; Alexander v. Security Bank & Trust Co. (D. C.) 273 F. 258.

The Referee has found that all the cash received by the bank, as local circuit court receiver, receiver in bankruptcy, and trustee in bankruptcy, went into the bank’s general cash, fund and all of the cheeks received by the hank in the same capacities were credited to the account of the bank at the Federal Reserve Bank of Chicago, Detroit Branch. He has also found that since September 30, 1830, and until the appointment of the conservator, the hank’s cash, including its deposit with solvent banks, has always exceeded the total of bankruptcy and local circuit court receivership funds on deposit with the hank, and that the balance in favor of the bank in the Federal Reserve Bank of Chicago, Detroit Branch, has always exceeded the bankruptcy and receivership funds on deposit with the bank. The Referee has also found that all the deposits mentioned in these several deposits augmented the assets of the bank, that they became a part of said assets, and that the balance aforesaid of $2,526.88 was included in said assets when the same were taken into custody and control of the conservator. It seems to me the findings of the Referee in this respect are supported by the record. The deposits and withdrawals through the different stages are numerous. All deposits appear to have been made by cash and by deposits of checks, as hereinbefore stated in such findings. The old rule as regards the tracing of funds and augmentation of assets was that trust funds wrongfully misapplied cease to be such when they were mixed and confounded with other funds. Philadelphia National Bank v. Dowd (C. C.), 38 F. 172, 2 L. R. A. 480; Peters v. Bain, 133 U. S. 670,10 S. Ct. 354, 33 L. Ed. 696. The more modem rule is that where the money increases the assets of the holder, it may, under certain circumstances, be made the subject of a trust, in order to accomplish the ends of justice. Harmer v. Rendleman (C. C. A.) 64 F.(2d) 422. The latter rale has been limited to the extent that it must he clearly shown that the trust properly has directly augmented the fund upon which the trust is to be declared, “so that a court of equity can see with certainty that the trust property is in his (receiver’s) hands.” Harmer v. Rendleman (C. C. A.) 64 F.(2d) 422, 423; Empire State Surety Co. v. Carroll County et al. (C. C. A.) 194 F. 593. I think this latter rule has been met in this ease. I may add that the case also presents a stronger case in favor of augmentation than is usually found since the receiver and the depository are one and the same. The decisions by the courts on the question of augmentation are many. Aside from those hereinbefore mentioned, we may cite: People’s National Bank v. Moore (C. C. A.) 25 F.(2d) 599; Fidelity & Deposit Co. of Md. v. Farmers’ Bank (C. C. A.) 44 F.(2d) 11. In my opinion the finding of the Referee that the deposit in this estate augmented the assets of the depository should he sustained.

Holding that these are trust funds, I come to the question of legality of the summary order directing the payment of such funds by the conservator. The Comptroller of the Currency is directed by statute to make a ratable distribution of the funds of the insolvent bank, and the receiver aets under his direction. 12 USCA § 194; Earle v. Pennsylvania, 178 U. S. 449, 20 S. Ct. 915, 44 L. Ed. 1146. Service of a certified copy of the judgment entered upon this decision and proof of the nonpayment of such judgment are sufficient proof of a claim. " Claims adjudicated in a court of record are expressly directed to he paid ratably. 12 TJSCA § 184. The funds of this estate are not in the hands of the trustee as such. They are in the hands of the insolvent depository in which payment of the claim is to be made pursuant to statute. The facts in Earle v. Pennsylvania, 178 U. S. 449, 20 S. Ct. 915, 917, 44 L. Ed. 1146, are comparable. There an attachment against an insolvent bank was sustained but payment was directed to be withheld pending distribution by the Comptroller of the Currency. The language of the court in that case is in point: “The scheme of the statute relating to suspended national banks is that from the time of a bank’s suspension all its assets, of whatever kind, as they are at the time of suspension, pass, in the first instance, to the receiver, the proceeds thereof to be distributed by the Comptroller among those whose claims are proved to his satisfaction or are adjudicated by some court of competent jurisdiction. So, when the Chestnut Street National Bank suspended and went into the hands of a receiver the entire control and administration of its assets were committed to the receiver and the Comptroller, subject, however, to any rights or priority previously acquired by the plaintiff through the proceedings in the suit against Long.” In Re Bologh (D. C.) 185 F. 825, it was held that the bankruptcy court could not order the Superintendent of Banks summarily to pay over moneys and the distinction between the authority of the court over property held by the trustee and money in the hands of the depository is pointed out. In Bank of Bethel v. Pahquioque Bank, 14 Wall. 383, 20 L. Ed. 840, it was held that payment of a judgment must wait distribution under the banking law. The orderly administration of the affairs of the insolvent bank require that the assets be marshaled so that the rights of creditors as between themselves may be determined. Preferred claims necessarily must be paid first, but all preferred claims might be required to be paid ratably among. themselves. The proper course, it seems to me, is to present to the receiver proof of the claim on account of these deposits as a preferred claim and to await the payment thereof by the Comptroller of Currency, through the receiver, in the regular and orderly administration of the affairs of the insolvent bank.

It does not seem to me to be necessary in this opinion to pass specifically upon each conclusion of law found by the Referee. With the exception of the finding that the bond given by the ,depository is not such a bond as contemplated by law, I think the opinion declares the view of the court as regards the other findings. In Re Battani et al. (D. C.) 6 F. Supp. 376, the question raised with regard to the validity of this bond was passed upon by me, and I held that the bond given by' the same surety as that in this proceeding was a valid bond. I adhere to that decision now, and the finding of law of the Referee to the contrary is reversed.

Findings may be submitted in accordance with this decision.


source: Caselaw Access Project

author: PATTERSON, District Judge.

license: Public Domain

text:
    In re DOELGER.
    No. 56945.
    District Court, S. D. New York.
    Jan. 15, 1934.
    Albert J. Sattler, of New York City, for petitioner.
    Krause, Hirseh & Levin, of New York City, for trustee.
   PATTERSON, District Judge.

On April 5, 1933, Doelger filed a petition for extension under section 74 of the Bankruptcy Act, one of the provisions for the relief of debtors added by the Act of March 3, 1933, § 1 (ll USCA § 202). The petition was approved by the court as provided in paragraph (a) of the section and the ease sent to a referee, but no further material progress toward a composition or extension proposal was made. One of the creditors then moved under paragraph (Z) for an order that the debtor be adjudicated bankrupt, on the ground that he had commenced or prolonged the extension proceeding “for the purpose of delaying creditors and avoiding an adjudication in bankruptcy.” The application was granted by the court on October 2, 1933, and an order of adjudication was entered three days later. Thereafter a trustee in bankruptcy was appointed. It then developed that on August 8, 1933, Doelger had conveyed certain real estate in New Jersey to two daughters. The real estate had been listed in the schedules filed by him with his extension petition. The referee issued an order to the daughters to show cause why they should not convey the real estate to the trustee. Over their protest that he had no jurisdiction, the referee entered an order that the daughters execute quitclaim deeds to the trustee. The daughters seek a review of this order.

The case, then, is one where a debtor who has filed a petition for extension of his debts under section 74 of the act has conveyed property to others without valuable consideration while the extension proceeding was still pending. In the further progress of the proceeding he is adjudicated a bankrupt. Has the bankruptcy court summary power to order the transferees to convey the property to the trustee? No eases arising under the new law have been cited, but a study of the act of March 3, 1933, leaves no doubt as to the existence of the necessary power.

Paragraph (m) of section 74 (11 USCA § 202 (m) is to the effect that the filing of the petition shall subject the debtor and his property to the jurisdiction of the court. It goes on to provide: “In proceedings under this section, except as otherwise provided therein, the jurisdiction and powers of the court, the title, powers, and duties of its officers and, subject to the approval of the court, their fees, the duties of the debtor, and the rights and liabilities of creditors, and of all persons with respect to the property of the debtor and the jurisdiction of appellate courts shall be the same as if a voluntary petition for adjudication had been filed and a decree of adjudication had been entered on the day when the debtor’s petition or answer was filed and any decree of adjudication thereafter entered shall have the same effect as if it had been entered on that day.”

By express provision of the statute, the power of the court and the duties “of all persons with respect to the property of the debtor” are the same as if the debtor had been adjudicated bankrupt on the day when he filed his petition. From that time forward the debtor’s property is in custodia legis. If . the debtor thereafter transfers property to others, the rights of the transferees are no better than as if the debtor had already been adjudicated bankrupt. And the jurisdiction of the court is the same as where a bankrupt transfers part of his estate after the filing of petition against him. The test then is whether an order of the kind made here would be proper if Doelger had been adjudicated bankrupt in April, when he filed his petition for extension.

The summary jurisdiction of the bankruptcy court attaches to property in the bankrupt’s possession at the filing of the petition in bankruptcy. Once attached, the jurisdiction is not lost by the bankrupt’s later transfer of part of the estate to others. The transferees may be ordered summarily to turn the property over to the trustee. Lazarus, Michel & Lazarus v. Prentice, 234 U. S. 263, 34 S. Ct. 851, 58 L. Ed. 1305; May v. Henderson, 268 U. S. 111, 45 S. Ct. 456, 69 L. Ed. 870; In re Denson (D. C.) 195 F. 854; In re R. & W. Skirt Co. (C. C. A.) 222 F. 256; Reed v. Barnett Nat. Bank (C. C. A.) 250 F. 983; In re Times Square Auto Supply Co. (C. C. A.) 47 F.(2d) 210. Since the real estate in question was part of Doelgetis estate at the filing of the petition, it is manifest that the referee had jurisdiction by summary order to direct that those who later acquired it from him should turn it back to the estate.

The respondents contended that Doelger was solvent when he conveyed the land to them. The facts seem to indicate that he was not solvent at that time, but, in any event, the solvency or insolvency of Doelger is not now in issue. The proceeding is not strictly one to recover a fraudulent conveyance. It is to restore to the bankrupt estate property taken from it in disregard of the fact that it was then in the custody of the court. White v. Schloerb, 178 U. S. 542, 20 S. Ct. 1007, 44 L. Ed. 1183; In re Smith (D. C.) 18 F.(2d) 797; Gamble v. Daniel (C. C. A.) 39 F.(2d) 447, 454. The referee was right in rejecting proof bearing on solvency.

The referee’s order directing a conveyance of the real estate to the trustee was proper and will be affirmed.


author: PATTERSOH, District Judge.

text:
    In re POLLACK.
    District Court, S. D. New York.
    Jan. 11, 1934.

      Maxwell S. Mattuck, of New York City, for trustee.
    Archibald Palmer, of New York City (Samuel Masia, of New York City, of counsel), for respondent.
   PATTERSOH, District Judge.

The application is to punish the bankrupt for contempt. The question relates to the sufficiency of the service of the orders of the court. After a proceeding of which the bankrupt had notice and in which he regularly appeared, the court ordered him to turn over certain books to the trustee in bankruptcy. A copy of the order was served on his attorney. There having been no compliance, the court issued an order for the bankrupt to show cause why he should not be punished for contempt. A copy was served on his attorneys, and an affidavit by a process server stated that service had also been made on the bankrupt personally on Hovember 4, 1933, at his residence. On the return day, his attorney appeared in opposition and submitted an affidavit by the bankrupt’s wife to the effect that the papers had been slipped under the door of the apartment and that the bankrupt had not been home for months. The court! referred the issue of • personal service to a special master. The latter has reported that in his opinion the bankrupt was not served.

1. The weight of evidence indicates that the man who was served on Hovember 4 was the bankrupt. I find nothing improbable in the testimony of the two process servers. That they went to the bankrupt’s apartment in the evening of that day, which was a Saturday, is conceded. One of them, Rudniek, testified that he asked for the bankrupt; that a woman who came to the door said that he would be back in half an hour; that then the bankrupt’s wife appeared and said he was out of town. Rudniek stated that he then went down to the street and made arrangements with his companion, Schwartz, whereby he would watch on the street and Schwartz would wait in the vestibule. The bankrupt’s wife then came out and walked up and down; Rudniek moving down the street a short distance so as not to be observed. An automobile of the color and type of that driven by the bankrupt then stopped in front of the place, and the wife talked to the man in it. The man went into the building, and Rudniek gave a whistle as prearranged with Schwartz.

Schwartz corroborated Rudniek as to what transpired between them on the street. He testified that he was in the rear of the apartment house when he heard the whistle; that, as he hurried into the house, he saw a man going up in the elevator; that he ran up the stairs, two flights, and saw a man just about to enter the apartment; that he addressed the man as Mr. Pollack, and said he had some papers, but that the man ignored him; that he then laid the papers on the man’s arm and departed.

The bankrupt’s wife was called in opposition. She testified that Schwartz had called and had been told by her that her husband was out of town; that later the papers were found outside the door. She stated that she had not seen the bankrupt in New York City for several weeks or months, but in this she was contradicted by the superintendent of the house, who testified that he saw and talked to the bankrupt twice during the week following the day of the alleged service. The wife’s testimony is unsatisfactory in other respects. She evaded saying whether or not the signature to a paper shown her was her signature. She also denied that her husband had an automobile, although here also the superintendent contradicted her.

I am satisfied that the testimony of the process servers, as well as that of the superintendent, was the truth. It is certainly more convincing than the wife’s testimony. If the process servers had been concocting a story, they would have made the matter of identification mueh stronger. They would have had the man who was served admit then and there that he was Pollack. The special' master did not find that the process servers were not telling the truth as to what had occurred; he did not accept the wife’s version in preference to theirs. His finding was simply that the testimony failed to show that the man who was served was the bankrupt. He was not satisfied as to identity. And yet the inference that the man served was actually the bankrupt is a strong one. The bankrupt was expected back; his wife was in the street, apparently to warn him; the man served drove an automobile like that used by the bankrupt; he was about to enter the bankrupt’s apartment when served. If the man who was served had been another, it cannot be doubted that the bankrupt’s attorney would have produced that other man before the special master.

The papers served were the order to turn over the books and the order to show cause why the bankrupt should not be punished for failure to turn them over. As already indicated, I am satisfied that there was personal service of both orders on the bankrupt.

2. The trustee urges that, whatever, the finding as to personal service on the bankrupt, service on the bankrupt’s attorney was a sufficient service. The point seems to be a sound one. Order 4 of the General Orders (11 USCA § 53) provides, in part: “Notices and orders which are not, by the act or by these general orders, required to be served on the party personally may be served upon his attorney.”

There is nothing in the Bankruptcy Act (11 USCA) or in the General Orders that requires service of these orders on the bankrupt personally. It follows that service on the attorney of record was an adequate service. The facts in Re Levin (C. C. A.) 15 F.(2d) 3, were substantially the same as here. The Circuit Court of Appeals for the First Circuit held that service of the papers on the bankrupt’s attorney was all that was needed to bring the matter before the court.

For these reasons,, the application of the trustee will be granted and an order adjudging the bankrupt in contempt will be entered.


author: WILLIAM C. COLEMAN, District Judge.

text:
    THE BEACON. THE CITY OF BALTIMORE.
    No. 1972.
    District Court, D. Maryland.
    March 8, 1934.
    Kirlin, Campbell, Hickox, Keating & McGrann, of New York City (by "William H. McGrann, of New York City, and Emory H. Niles and Theodore B. Dankmeyer, both of Baltimore, Md.), for libelant and cross-respondent.
    Janney, Ober & Williams, of Baltimore, Md. (by Bobert W. Williams and Southgate L. Morison, both of Baltimore, Md.), for respondent and cross-libelant.
   WILLIAM C. COLEMAN, District Judge.

This is a collision case between two vessels in which the libelant, Standard Shipping Company, owner of one of the vessels, the tanker Beacon, seeks to impose the sole liability for the collision upon the other vessel, the steamship City of Baltimore, charging that vessel, first, with being unseaworthy, and, secondly, with having been improperly navigated. By its cross-libel the Baltimore Mail Steamship Company, owner of the steamship City of Baltimore, seeks to impose sole liability on the Beacon, charging that this vessel was improperly navigated, and also claiming that the City of Baltimore was properly navigated, and is exonerated from all blame by inevitable accident, namely, a breakdown in her steering engine which, rendered her out.of control and placed her in the path of the Beacon.

The collision occurred in full daylight, on July 13, 1933, at 6:15 p. m., off No. 9 Buoy in CraigMll Channel, Baltimore Harbor, while the City of Baltimore was outbound and the Beacon was inbound. Weather conditions were distinctly favorable, clear, little wind, the tide flood.

After exchanging signals for a port to port passing, one blast, while the vessels were about a mile apart, each in proper position, on her own starboard side of the channel, ’ the City of Baltimore proceeding at about thirteen knots and the Beacon ten knots, the City of Baltimore began to sheer to port when within from a quarter to a half mile of the Beacon, and finding it impossible to correct this sheer because of the failure of her rudder to respond to wheel movements, she sounded a series of danger signals and simultaneously went full speed astern. Upon seeing the sheer of the City of Baltimore and hearing her danger signal, the Beacon did not alter her course to starboard or port, but promptly went full speed astern. Nevertheless, the two vessels collided. The City of Baltimore, with headway still slightly on, was rammed by the Beacon just aft of her, the City of Baltimore’s, starboard chain-locker, while the Beacon was admittedly still making headway of six knots. The City of Baltimore gave no signal of her astern movement nor did the Beacon. There is a conflict in the evidence as to whether the Beacon answered the danger signals of the City of Baltimore, the master and pilot of the latter claiming that she did not, while the master and pilot of the Beacon testified directly to the contrary. But it becomes unnecessary to determine this point, because the master and pilot of the Beacon both admitted that even had they heard this signal from the City of Baltimore, their action with respect to the Beacon would have been the same.

The City of Baltimore was badly damaged, her No. 1 and No. 2 holds were flooded, ' and the stem of the Beacon was also damaged to a considerable extent; and as a result of the collision, fire broke out in the forward part of the Beacon.

After the collision, it was discovered that the failure of the City of Baltimore’s rudder to respond to the wheel movements was due to the slipping of the yoke on the valve stem of the steering engine. Before and at the moment of collision the City of Baltimore was being steered by her telemotor mechanism, which was in first class condition. No effort was made to change over to either the electric or hand-steering mechanism, because the former also operated on the steering engine and the change would have required one minute to complete; and the latter mechanism was not capable of control from the bridge. Both of these mechanisms were also in first class condition. The period that elapsed between the commencement of the City of Baltimore’s sheer and the actual collision was not more than a minute and a half. At the point of collision the channel was some 609 feet wide.

With those facts, which the court has found, it will thus be seen that the questions raised by the libel and cross-libel may be stated as follows:

First, Was what occurred on the City of Baltimore with respect to her steering engine an inevitable accident? Second, If so, was it the sole cause of the collision or did either vessel, or both of them, directly contribute to the collision by reason of improper navigation?

Taking up these questions in the order given, since the City of Baltimore has asserted the defense of inevitable accident, the burden of proof rests upon it throughout the ease to establish this fact by the clear weight of the credible evidence. The rule is that which is laid down in the case of The Edmund Moran (C. C. A.) 180 F. 700, which is that in order to sustain this burden the party alleging it must do one of two things; either must show what was the cause of the accident and that the result of that cause was inevitable; or must show all the possible causes, one or the other of which produced the effect; and must further show with regard to every one of these possible causes that the result could not have been avoided.

The court concludes that this burden has been met by the City of Baltimore for the following reasons: First, there is no credible evidence in contradiction of the fact that the loss of control of the City of Baltimore was due to the slipping of the yoke on the valve stem; second, equipping the valve stem in this fashion was standard equipment, long in use on vessels of the type of the City of Baltimore as well as on vessels of various other kinds; third, this mechanism was in first-class condition when installed; fourth, no similar breakdown had ever previously occurred on this or any other vessel so far as known to the manufacturers of the equipr meat, or to any one else; fifth, it Had been subject, since its installation, to inspection which, as regards both extent and frequency, was adequate under the circumstances.

On behalf of the Beacon it is asserted that the City of Baltimore must do> more than show this; that the defense of inevitable accident fails if the proof falls short of disclosing not merely the exact breakdown which caused the accident, but what indubitably caused the particular part of the machinery to break down. That is to say, it is claimed that the City of Baltimore must prove the actual origin of the trouble, whether it was inherent in the design, the workmanship, or the material that went into the mechanical part or parts in question, or was brought about by some particular stress or strain; and that it is not enough merely to prove that due care and diligence were used in the installation and upkeep of the part or parts.

It is conceded that such a requirement has not, in fact, been met, because none of the witnesses has stated that he could, in fact, account for what happened, that it was a baffling occurrence, readily understandable after the event, but not, in fact, traceable with certainty to any one thing. But we cannot impose such a requirement under the given circumstances, because to do so would, in effect, be declaring that every shipowner installs and use^maehinery of this kind at his peril, that he insures it will never break down. Surely the purchasers and users in good faith of a piece of machinery of this kind should not be charged with a knowledge of that article, or of what it may or may not do at all times under all conditions, superior to that which all those who have produced it, and from whom it is acquired, possess. No, the test of inevitable accident is met when, first, the cause of the aeeident is disclosed within the limits of the most reliable expert knowledge peculiar to the given art, and, second, when it is conclusively shown that with the exercise of reasonable care, based upon such knowledge, the accident did nevertheless in fact occur.

Such is the situation which the court finds in the present case. Both of these prerequisites have been conclusively established. None of the eases cited are controlling in contradiction of this conclusion, because they disclose some factor that distinguishes them, some shortcoming in the proof respecting either one or both of these prerequisites.

The contention that it may not have been the breakdown in the steering engine that was the proximate cause of the sheer of the City of Baltimore, but rather her “smelling the bank” on the right of the channel, requires scarcely more than passing notice, because totally unsupported by the credible testimony. It is asserted on this point that since it is uneontradieted that after the collision the rudder of the City of Baltimore was found to be to the right some 45 degrees, this fact supports the “smelling the bank” theory, or at least refutes the testimony to the effect that her helmsman could not obtain a right rudder just prior to the collision. But suffice it to point out that there was in fact no bank on the right side of the channel such as could have produced the suggested suction, . there being only a gradual trend of 30 or 35 feet inside the channel, and outside of that the depth was in excess of the draft of the City of Baltimore for a wide area, the land being about a mile distant. Also, the rudder indicator was in proper working order and did, in fact, record a failure to obtain a right rudder.

The Beacon’s own witnesses admit that the slipping of the yoke on the valve stem was sufficient to put the vessel out of control. Furthermore, the breakdown may very well have been intermittent just before or after the ’collision, as is evidenced by the fact that after the collision, control twice failed, and was twice restored, before the cause of the trouble was found and remedied.

We come, then, to the remaining question, whether the navigation of either one or both of the vessels was faulty. First, as to the manner in which the City of Baltimore was navigated, we conclude that the only error that may fairly be laid to her master or pilot was that the full speed astern signal was not given after the danger signal was given by her. But we feel that the emergency conditions whieh gave the right to invoke rule 27, ipso facto revoked the necessity to advise the Beacon of the maneuver astern. But in any event it becomes unnecessary to answer this question with precision because both master and pilot of the Beacon testified that had they received such signal they would not have steered their vessel differently. And it appears from the evidence that there was in fact no confusion as to this stern movement by the City of Baltimore; that is, that the Beacon was well aware of it.

Lastly, as to the navigation of the Beacon, we also fail to find any negligence there. The situation was one which called for quick thinking and quick acting. A choice of three possible courses lay open. There was little time within whieh to speculate, not more than four or five times the length of either vessel separated them. Neither could completely lose headway in. that distance. The Beacon did what seems to the court to have been entirely reasonable under the circumstances, she immediately went full speed astern.

The other alternatives were, first, to have gone to starboard, and, second, to have gone to port. As to the first of these other alternatives, it is reasonable to assume that by the adoption of it the Beacon would have put both herself and the City of Baltimore in perhaps greater danger. She might have laid her course directly across the bow of the City of Baltimore and might, in addition, have run aground by running outside of the channel. •

As to the remaining alternative which the City of Baltimore has urged that the Beacon should have taken, namely, a turn to port, and the use of one of her engines to give her the most complete and effective swing, that is a reasonable contention, and it is possible that had she done so she would have swung either entirely clear of the City of Baltimore, or would, at worst, have merely grazed her side and slipped by. Indeed, the calculations, minutely made, indicate that entire clearance probably would have occurred. But, after all, that is paper calculation and eaúnot always be allowed to offset the action or reasoning of the human mind, squarely facing a dilemma. In other words, such calculations are fraught with speculation. While one person’s judgment might, on the facts as stated after the event, appear to be better than the judgment of another person, equally or even more skilled, who actually found himself in the predicament, nevertheless it does not follow that the judgment of this latter person is so faulty as to imply want of due care. Of the two possible decisions, his may be the less wise, but it does not follow that it amounts to culpability. Indeed, had the Beacon tried the proposed maneuver, and the starboard to starboard passing had failed, she might have rammed the City of Baltimore broadside and at greater speed, which would have been vastly more serious.

There is a great deal of data in the ease which has not been referred to, such as the technical computations, the attempts to ascertain precisely the time when the vessels reached given points, and a great deal of other data bearing upon the two main questions at issue. But the findings of fact which have just been given seem to the court to cover all of the material points at issue. A case of this kind ismot to be decided by rule of thumb, because the human equation plays a very strong part. Therefore, the court reaches the conclusion that it does, not without having considered these refinements of computations and calculations, such as those shown by the graphs of the gyro-compass, but feeling that they are of secondary importance when the major facts are understood, and the working of the minds of the men in charge of both vessels is fully ascertained.

To summarize, therefore, both vessels are exonerated, and, accordingly, a decree will be signed dismissing both libels, each party to pay its own costs.


author: BYERS, District Judge.

text:
    THE W. I. RADCLIFFE. THE SYLVAN ARROW. WYNSTAY S. S. CO., LIMITED, et al. v. UNITED STATES.
    District Court, S. D. New York.
    March 13, 1934.
    Kirlin, Campbell, Hickox, Keating & MeGrann, of New York City (J. H. Tumure, of New York City, of counsel), for libelants and S. S. W. I. Radeliffe.

      Martin Conboy, U. S. Atty., of New York City (Charles E. Wythe, Sp. Asst. U. S. Atty., of New York City, of counsel), for respondent.
   BYERS, District Judge.

On December 1, 1918, the British steamship W. I. Radeliffe was at anchor in the anchorage grounds off Tompkinsville, Staten Island, having arrived in the late afternoon of November 28th. She was light in ballast and was held in position by her port anchor on fifty fathoms of chain.

On November 29th, the Sylvan'Arrow, in the possession and control of the United States of America, arrived from sea and came to anchor about a ship’s length from the Radeliffe to the west; that is to say, nearer to the Staten Island shore; she was held in place by her port anchor on fifty fathoms of chain.

Both vessels remained in their respective positions throughout that and the following day, swinging clear in the tide, without incident. About 4 a. m. of December 1,1918, the wind, whieh had been blowing out of the northwest, veered to west and increased in force; about 5:30 a. m., the velocity had reached over 50 miles an hour, again out of the northwest; at that time the tide was flood. As the vessels were headed, the tide and the wind were somewhat opposed, so that both ships pointed in a westerly direction. Anchor lights were displayed aboard both ships, and anchor watches maintained.

The Sylvan Arrow was also light and, because her forward tanks were being steamed, she was drawing 16 feet 6 inches aft and only 4 feet 6 inches forward. Between 5:30 and 5:40 a. m., the Sylvan Arrow began to drag her anchor and to drift down upon the Radeliffe broadside on; as soon as this was noticed on the latter vessel, efforts were made to pay out her own anchor chain, but this could not be accomplished before she was struck by the drifting vessel, which inflicted damage upon the Radcliffe’s bow of a serious and substantial nature. The starboard side of the Sylvan Arrow, well aft, struck thp Radeliffe with great force.

The depositions indicate clearly that the Radeliffe was without fault and that the Sylvan Arrow was to blame because her anchors were too light; this was known to her commanding officer because on previous occasions she had dragged her anchors, as stated by her officers in their testimony before the Naval Board of Investigation whieh met December 26, 1918.

The defense of inevitable accident, pleaded in the answer, has not been sustained.

In view of the known defect in equipment, it was dearly the duty of the commanding officer or the officer on watch from 4 to 8 a. m. on ihe Sylvan Arrow, to put out a second anchor when the wind increased in force so as to render her position one of possible hazard to the Radeliffe.

The respondent sought leave to amend its answer at the trial so as to include allegations of fault on the part of the Radeliffe whieh had not been pleaded. The motion was denied because it was thought the government was too late in seeking to change its theory of defense; even if the motion had been granted, the result would be the same, in view of the testimony.

The cause is pending by virtue of a special Act of Congress approved March 2,1929 (45 Stat. 2351), which provides that the claim of the Wynstay Steamship Company, Limited, owner of the Radeliffe, against the United States for the damages caused by this collision may be determined in a suit to be brought in this court of admiralty, and that jurisdiction shall pertain to the court to hear and determine the suit and enter an appropriate decree as in like cases between private parties.

The government therefore has consented to be sued by the named corporation, “owner of the steamship Radeliffe.”

It appears from the register of British ships in evidence that the Radeliffe was jointly owned by the first named libelant as to 33/64 and by W. I. Radeliffe Steamship Company, Limited, as to 31/64, and the point is made by the government that the enabling act extends only to the Wynstay Steamship Company Limited, as owner, and consequently recovery can be had only by that company to the extent of its ownership.

As the jurisdiction of the court must be measured by the enabling act, it is quite apparent that the court would be without authority to enter a decree in favor of the W. I. Radeliffe Steamship Company, Limited, or in favor of the Wynstay Steamship Company, Limited, on behalf of the former. This is a circumstance over whieh the court has no control, and consequently the decree must conform strictly to the enabling act, however clear it may be that Congress must have intended that the damages resulting from the collision in question should be assessed in one suit. This must be so, because, if a decree had been for the respondent, it would be clear that the court could not enter a judgment against W. I. RadcBffe Steamship Company, Limited.

The Wynstay Steamship Company, Limited, may take the usual interlocutory decree, with costs, and its ultimate recovery will be limited to 33/64 of the damages found.

Settle decree on notice.

If findings are desired, they may be settled at the same time, and are to embody appropriate recitals as to ownership and incorporation.


author: WELSH, District Judge.

text:
    NATIONAL POPSICLE CORPORATION et al. v. HARVEY et al.
    No. 7847.
    District Court, E. D. Pennsylvania.
    April 26, 1934.
    J. Louis Breitinger, of Philadelphia, Pa. (Daniel G. Albert, of-Brooklyn, N. Y., of counsel), for plaintiffs.
    John E. Flynn, Robert T. Potts, and W. Russell Green, all of Norristown, Pa. (Leo M. Fast, of New York City, of counsel), for defendants. •
   WELSH, District Judge.

The above-entitled cause having duly come on for trial at a stated term, to wit, the March term, 1934, of the United States District Court for the Eastern District of Pennsylvania, held at the courtroom thereof in the city and county of Philadelphia, state of Pennsylvania, on Monday, the 7th day of March, 1934, and succeeding days, before me for a premanent injunction, and the same having been tried before me, and all the parties hereto having duly presented proofs and evidence on all the issues involved therein and submitted to the court for consideration and decision:

This is a suit for a permanent.injunction for the alleged infringement by defendants of: United States letters patent No. 1,505,-592, granted August 19, 1924, to Frank W. Epperson, for “Frozen Confectionery,” which is a process patent; United States letters patent No. 1,470,524, granted October 9, 1923, to Harry B. Burt, for “Process of Making Frozen Confections,” which is a process patent; United States letters patent No. 1,-718,997, granted July 2, 1929, to Harry B. Burt for “Frozen Confection,” which is a product patent; United States letter patent No. 85,189, granted September 22, 1931, to Leonard B. Krick for “Design for a Confection,” which is a design patent.

The bill of complaint also charged the defendants with violation of seven United States registered trade-marks owned by the plaintiff the Popsiele Corporation of the United States: No. 177,230, registered December 11, 1923; No. 219,744, registered October 26, 1926; No. 274,276, registered August 26, 1930; No. 284,006, registered June 9, 1931; No. 288,393, registered October 27, 1931; No. 288,507, registered October 27, 1931; No, 288,575, registered November 3, 1931, of which the frozen confection sold under plaintiff’s trade-mark “Popsiele” during the year 1931 amounted to approximately 225,000,000 confections of the plaintiff, and substantial portions of such sales were made in the Eastern District of Pennsylvania.

The bill of complaint also charged the defendants with engaging in unfair business competition and using unfair trade practices.

The testimony shows that, if the patents are valid, they were infringed by the defend°ants.

The Epperson patent relates to the manufacture of frozen confections which have a frozen body portion formed of an edible liquid, flavoring matter, and sugar, which is subjected to intense refrigeration so as to form a confection homogeneous from end to end, and of such character that the flavoring matter and sugar may be sucked therefrom to leave a tasteless mass of snow or ice. The claims therefore disclose the process of preparing such a frozen confection by immersing the combined handle and sustaining member through substantially the entire height of the portable substance and subjecting the same to refrigeration, causing the confection to become solidified by congelation to the solid sustaining member extended thereinto.

The Burt patents relate to a frozen confection which will stay on a stick until entirely consumed, by the application of refrigeration after the insertion of the stick, the frozen crystals of the confection extending into the pores of the stick from the body of the material so as to form an effective congelation bond.

The defendants attempted to defend, alleging that: The prior art of Hinck, patent No. 1,312,325, teaches a handle member attached to an edible body substance. The pri- or art of Holden, patent No. 207,278, teaches handle members attached to ice blocks by congelation; in other words, adhesion by congelation. The prior art of the Eskimo pie (Nelson patent No. 1,404,539) teaches a body portion frozen by congelation and an edible protective covering therefor; and that the patents as claimed by the plaintiffs are invalid.

It has been decided, however, that these three alleged prior art patents, the Hinck patent, No. 1,312,325 (the lollipop on a stick); The Holden patent, No. 207,278 (the large block of ice with a rope handle frozen therein); and the Nelson patent, No. 1,404,-539 (Eskimo pie without a stick), did not read upon the patents in issue.

In re Burt, 58 App. D. C. 7, 24 F.(2d) 273, the Court of Appeals stated:

“To insert a stick in a small cake of frozen ice cream would break the cake apart, and if the cream was less hard the stick would not adhere sufficiently to permit handling. Of course, to be a success, the union between the stick and the frozen cream must be such as to permit the eating of the cream without breaking the union, and to make this result attractive to the public it must be accomplished without human hands touching the article in the process of manufacture. Finally, Mr. Burt hit upon the idea of freezing the stick in the ice cream; that is, by inserting the stick in the cream before freezing and then subjecting the mass to refrigeration. His experiments demonstrated that such a process created the desired union between the cream and the stick. The product was placed upon the market and has been a great success. * * *

“It is one thing to insert a stick in a warm, soft, sticky substance, that by cooling will adhere thereto, and quite another thing to effect a strong union between a stick and a frozen substance.”

In the case of Popsicle Corporation of the United States v. Isadore Weiss (D. C.) 40 F.(2d) 301, Judge Bondy discussed the various claims, stating:

“Burt provides a frozen confection which will stay on the stick until entirely consumed, by the application of refrigeration after the insertion of the stick, the frozen crystals of the confection extending into the pores of the stick from the body of the material so as to form an effective bond.

“A method of uniting a frozen confection to a stick was unknown to the art of making frozen confections,” and further stated:

“None of the prior art patents (Burt’s, 1,470,524; Holden’s, 207,278; Goldberg’s, 60,136; Bom’s, 1,195,437; McCoy’s, 1,506,-539; Kell’s, 284,212; Schroeder’s, 850,607; Lustig’s, 793,453 and 797,775) disclose a process for making a frozen confection (with or without a handle member) by the application of rapid and intense refrigeration of a potable liquid, flavoring matter, and sugar in a quiescent condition, producing a carrier for liquid syrup which may be sucked from the confection and leave a tasteless mass of ice.

“The claims relate to a specific mode of treatment of certain material to produce a new and useful article, and are therefore valid. Cochrane v. Deener, 94 U. S. 782, 24 L. Ed. 139; P. E. Sharpless Co. v. Crawford Farms, Inc. (C. C. A.) 287 F. 655. * * *

“Goldberg’s patent, No. 60,136, and Me-Coy’s, No. 1,506,539', relate to candy or lollypops which are not liquid at ordinary temperature. * * *

“The claim is restricted to the application of a process to an edible substance which is fluid at normal temperature, which is subjected to refrigeration which not only solidifies the body, but also attaches the body to the previously inserted handle by congelation. It therefore has not been anticipated by lollypops, which axe not subjected to refrigeration and are not attached to a stick by congelation, nor by Lustig’s patents, Nos. 793,453 and 797,775 for nonedible cones without handles, nor by Nelson’s, No. 1,404,-539, for a frozen confection without a handle, nor by Sehroeder’s No. 850,607, for a process of making large blocks of earbonated iee, nor by Kells’, No. 284,212, for a process of cooling lard and like material for further treatment to obtain paraffin wax.

“Holden’s patent, No. 207,278, issued over fifty years ago, is the only prior art patent in evidence which discloses any substance frozen to a handle. It discloses a handle of metal plate which has no pores mto which water can enter to form a bond, and a flexible looped cord which cannot be used as a handle to hold up a frozen confection while being eaten. His patent relates to the.process of making blocks of ice having a piece of cord frozen into the same to facilitate the lifting and handling of the ice.”

The instant ease, however, is a true combination of two products which perform a separate and distinct function by themselves when separated, but, when combined by the inventor Burt, form a new, and novel, and extremely useful, true combination, as the combination of the ice cream with the stick is a true physical bond, known as a congelation bond, which is produced by the growth of the crystals from the ice cream into and through the pores of the wooden stick penetrating into the ice cream.

Separating the stick and the ice cream, we have an ordinary wooden stick, which by itself is nothing more than a piece of wood and performed no utility whatsoever as such. We also have a piece of ordinary ice cream, which for many years has been eaten from a plate and with the use of a spoon; and at no time prior to Burt’s patent did any one conceive of the idea of consuming an ice cream confection to completion without soiling the hands or clothing, unless the confection was consumed by means of a spoon or tinfoil or by means of a baked edible container, or other means. The combination of the stick and the ice cream as taught by the Burt Product patent brings about a new and useful-product with a ppsitive, useful, and novel result, and the plain, ordinary stick has be* come a handle member about which the ice cream is congealed by means of a strong physical, crystalline union or bond, and the edible substance contained about said stick may be completely and comfortably consumed to completion without any part of, the hand coming in contact with the edible substance and without any part of the edible substance soiling the clothing of the person eating the confection, and at the same time producing a sanitary means whereby the stick also aids in the manufacture of the confection and in the handling and selling thereof.

If this combination were merely an aggregation instead of a true combination, and we pull the parts of this combination apart, we have each part still performing the same function as it did in the aggregation. This is impossible in the instant ease, and it is apparent that this is a true combination and not a mere aggregation.

This principle is set forth in the case of Pickering v. McCullough, 104 U. S. 310, 318, 26 L. Ed. 749, wherein it was stated: “It must form either a new machine of a distinct character and function, or produce a result due to the joint and co-operating action of all the elements, and which is not the mere adding together of separate contributions.”

Judge Mantón in the United States Circuit Court of Appeals for the Second Circuit, in the ease of Line Material Co. v. Brady Electric Mfg. Co., 7 F.(2d) 48, at page 50, said: “Aggregation means that the elements of a claimed combination axe incapable of co-operation to produce a unitary result, and in its true sense does not need prior art patents to support it, because obviously, if there is no co-operation between the parts, as claimed, there is no patentable combination. * * * Where patents have failed because of aggregation, the controlling factor has been that there was no combination in fact.”

In the instant ease there is also a true combination in fact between the ice cream and the stick in the Burt frozen confections, caused by the monolithic growth of the ice , crystals of the iee cream into and completely through the stick to give that edible adhesion which is essential for the production of a commercial product, which is shown by the fact that, regardless of how the combined product is handled after the stick has become congealed thereinto, there is no way of causing the ice cream to fall off of the stick unless it is eaten off or completely melted off.

Burt evidently discovered the novel utilization of an old principle to accomplish a new result and supply a new commodity of commerce — an article of manufacture formed into a single unit by a physical process of congelation made available by refrigeration.

The evidence as disclosed by the tests of aggregation and combination and those of substituting materials including what takes place when the confection sticks are dipped in paraffin shows that this invention is a true combination and not a mere aggregation.

After due deliberation having been had thereon, I do hereby make and find the following findings of fact and conclusions of law:

First. That the plaintiff National Popsiele Corporation is a corporation of the state of New Jersey, and the Popsiele Corporation of the United States is a corporation of the state of Delaware, and that said companies are respectively the owner and the exclusive licensee under the United States letters patent No. 1,505,592.

Second. That the plaintiff Good Humor Corporation of America is a corporation of the state of Ohio, and is the owner of United States letters patent No. 1,470,524 and No. 1,718,997.

Third. That the plaintiff the Popsiele Corporation of the United States is the owner of United States design letters patent No. 85,189.

Fourth. That the plaintiff the Popsiele Corporation of the United States is the owner of United States registered trade-marks Nos. 177,230; 219,744; 274,276 ; 284,006; 288,393 ; 288,507; and 288,575.

Fifth. That United States letters patent No. 1,505,592, issued August 19, 1924, to Frank W. Epperson for “Frozen Confectionery,” are good and valid in law as to all of the claims thereof, and have been infringed by the defendants.

Sixth. That United States letters patent No. 1,470,524, issued October 9, 1923, to Harry! B. Burt, for “Process of Making Frozen Confections,” are good and valid in law as to all of the claims thereof, and have been infringed by the defendants.

Seventh. That United States letters patent No. 1,718,997, issued July 2, 1929, to Cora W. Burt, as assignee of Harry B. Burt, and his executors, for “Frozen Confection,” are good and valid in law as to all of the claims thereof, and have been infringed by the defendants.

Eighth. That United States design letters patent No. 85,189, issued September 22, 1931, to Leonard B. Kriek for “Design for a Confection,” are good and valid in law, and have been infringed by the defendants.

Ninth. That United States trademarks No. 177,230, registered December 11, 1923, No. 219,744, registered October 26, 1926, No. 274,276, registered August 26, 1930, No. 284,006, registered June 9, 1931, No. 288,393, registered October 27, 1931, No. 288,507, registered October 27,1931, and No. 288,575, registered November 3, 1931, are good and valid in law, and have been violated and infringed by the defendants.

Tenth. That the confection frozen on sticks as manufactured, sold, and distributed by the defendants herein, and termed by them “Ice Popsicles,” infringe upon each and all of the claims of Epperson letters patent No.

1.505.592, infringe upon claims Nos. 1 and 2 of Burt letters patent No. 1,470,524, and infringe upon claims Nos. 1 and 7 of said Burt letters patent No. 1,718,997, and upon the rights of plaintiffs under each and all of said patents and the claims hereinabove specified.

Eleventh. That the confections frozen on sticks as manufactured, sold, and distributed by the defendants herein, and termed by them “Yum-Yum Popsicles,” infringe upon claims Nos. 6 and 7 of Epperson letters patent No. 1.505.592, infringe upon claims Nos. 1 and 2 of Burt letters patent No. 1,470,524, and infringe upon claims Nos. 3, 3, and 7 of the Burt letters patent No. 1,718,997, and upon the rights of plaintiffs under each and all of said patents and the claims thereof herein-above specified. -

Twelfth. That the confections frozen on sticks as manufactured, sold, and distributed by the defendants herein, and termed by them “lee Cream Popsicles,” infringe upon claims Nos. 6 and 7 of Epperson letters patent No. 1.505.592, infringe upon claims Nos. 1 and 2 of Burt letters patent No. 1,470,524, and infringe upon claims Nos. 1, 3, 5, and -7 of Burt letters patent No. 1,718,997, and upon the rights of plaintiffs in each and all of said patents and the claims thereof hereinabove specified.

Thirteenth. That all of the confections frozen on sticks as manufactured, sold, and distributed by defendants herein, and termed respectively “lee Popsieles,” “Yum-Yum Popsieles,” and “lee Cream Popsieles,” infringe upon the claim of Erick United States design letters patent No. 85,189, and upon the rights of plaintiff the Popsiele Corpora-' tion of the United States, under said patent and the claim thereof.

Fourteenth. That the methods of sale and distribution employed by the defendants herein as to all of the confections frozen on sticks and sold and advertised for sale respectively by the defendants as “Ice Popsieles,” “Yum-Yum Popsieles,” and “lee Cream Popsieles,” are in violation of and infringe upon the rights of plaintiff the Popsiele Corporation of the United States, in, to, and under the trade-mark “Popsiele” as covered by the United States trade-mark registrations here in suit.

Fifteenth. That the prior art cited by the defendants, to wit, Hinek patent No. 1,-312,325, relating to a mold or method for making candy lollypops, Holden patent No. 207,278, relating to a method and apparatus for manufacturing ice, and Nelson patent No. 1,404,539, relating to a chocolate-coated •ice cream confection, do not disclose nor describe the inventions of the patents here in suit; said prior art patents being unrelated and directed to widely diversified arts, neither suggesting nor describing any ways or means for producing the subject-matters or processes involved herein, and they cannot be combined to anticipate the inventions of the patents herein before me which relate to a specific mode of treatment of certain ma- ‘ terial to produce a new and useful article.

Sixteenth. That a method of uniting a frozen confection to a stiek was, prior to the advent of the patents in suit, unknown in the art, and the specific processes described and claimed in the patents in suit are new, novel, and useful, and result in producing a new, novel, and useful article, which has received wide acceptance and recognition by the frozen confection industry.

Seventeenth. That the evidence concerning the well-known “jelly apple” on a stiek discloses clearly that it is similar in many respects to the well-known candy lollipop, and that the “jelly apple” is as different from the confections manufactured under the patents here in suit as is the candy lollipop.

Eighteenth. That the patents in suit disclose and cover a frozen confection, which will stay on the stick until entirely consumed, by the application of refrigeration after the insertion of the stiek, the frozen crystals of the confection extending into the pores of the stiek from the body of the material so as to form a congelation bond, thereby bringing about a true combination in fact, the union between the stiek or handle member .and the frozen substance of the confection produces a different force, effect, and result in the combination thereof from that given by each of the parts separately, and in so doing a new article of a distinct character and function is produced as the result of the joint and co-operating action of all the elements combined.

Nineteenth. That the prior use of a snowman having a broom handle stuck therein, as cited by the defendant, has no application to the inventions of the patents in suit; that there is no identity of function nor identity of the manner of performing that function between the snowman and the broomstick on the one hand, and the frozen confection and the handle member as disclosed by the patents in suit on the other hand; that I find that the broomstick in the snowman not only does not perform the function of the stick in the frozen confection in the same manner, but does not perform the same or a similar function; and that I further find that the same also is true of the two bodies in comparison, that not only does the snow or ice of the snowman not perform the same function as the ice cream in the confection in the same manner, but it does not perform the same or a similar function.

Twentieth. That at the time of the acts of infringement complained of herein the defendants were operating without a license or consent from any of the plaintiffs, expressed or implied.

Twenty-First. That the equipment used by the defendants herein in the manufacture of infringing articles under the patents in suit, having been purchased from the plaintiffs while operating under a previous license, which has since expired, was subject to restriction, and that the defendants violated said restriction and were using said equipment, consisting of so-called “Popsiele” molds and stiek centering devices illegally and without authority, expressed or implied.

Twenty-Second. I further find that the evidence submitted proves conclusively that the use of paraffin-coated or paraffin-treated sticks does not prevent or alter the formation of an effective congelation bond between the frozen body substance and the stiek or handle member of the confection, as described and claimed in the patents in suit, and that the bond - formed under such circumstances is similar in every respect to the bond produced between the frozen body substance of the confection and an untreated stick or handle member.

Accordingly, I find that the plaintiffs are entitled to the relief as prayed, for and to judgment on all the issues; and judgment is rendered in favor of the plaintiffs and against the defendants with costs and disbursements; giving them a permanent and perpetual injunction, as prayed for in the bill of complaint herein, together with damages and an impounding order.

Decree will issue accordingly.


text:
    In re BINSKY.
    District Court, S. D. New York.
    Jan. 15, 1934.
    Gettinger & Gettinger, of New York City, for Straus Nat. Bank & Trust Co.
    Nathan G. Behrman, of New York City (Benjamin S. Kirsh, of New York City, of counsel), for bankrupt.
   PATTERSON, District Judge.

Binsky was adjudicated a bankrupt on December 29, 1933. A few days later he obtained ex parte a stay restraining Straus National Bank & Trust Company from proceeding further in a suit which it had commenced against him in the New York Supreme Court. The present motion is by the bank to vacate that stay. The sole question is whether the liability against the bankrupt asserted in the suit is one dischargeable in bankruptcy. If it is, the stay should not be disturbed; if it is not, the stay should be removed.

The complaint in the state court alleged that the bankrupt, as collateral security for loans made to him, executed an assignment in favor of the bank, covering his interest in a certain corporation; that thereafter the bankrupt received more than $4,000 from the corporation on account of his interest in it; that the moneys belonged to the bank by virtue of the assignment, but that the bankrupt, instead of paying them over, converted them to his own use.

Liabilities for “willful and malicious injuries to the person or property of another” are excepted from debts dischargeable in bankruptcy under section 17 of the Bankruptcy Act (11 USCA § 35). The deliberate conversion of property belonging to another is such an injury, whether the property be sold by the bankrupt or be used and kept by him for his own purposes. McIntyre v. Kavanaugh, 242 U. S. 138, 37 S. Ct. 38, 61 L. Ed. 205; In re Keeler (D. C.) 243 F. 770; Baker v. Bryant Fertilizer Co. (C. C. A.) 271 F. 473; In re Stenger (D. C.) 283 F. 419; In re Nordlight (D. C.) 3 F. Supp. 486. Here the bank has brought suit on the charge that although the bankrupt had assigned to it his interest in a company, he thereafter collected and kept for himself moneys arising from the assigned property. If the facts alleged axe true, there was an intentional conversion of the bank’s property and a “willful and malicious” injury to its property. Covington v. Rosenbusch, 148 Ga. 459, 97 S. E. 78, is precisely in point. There the bankrupt assigned his wages for value and later collected them himself, refusing to turn them over to the assignee. It was held that he was liable for conversion and that a later discharge in bankruptcy did not rid him of the liability.

The bankrupt has interposed an affidavit which tends to indicate that there was no conversion. The court cannot consider matters of this sort. The question now is, not what the bankrupt did, but what he is charged in the pending suit with having done. It is clear that the liability asserted against him is one not dischargeable in bankruptcy.

The application to vacate the stay will therefore be granted.


author: KNIGHT, District Judge.

text:
    In re B. W. SCOTT BOOK & ART STORE, Inc.
    No. 20774.
    District Court, W. D. New York.
    May 1, 1934.
    George F. Ditmars, of Geneva, 2ST. Y., in pro. per.
    William S. Moore, of Geneva, N. Y., for execution creditors.
   KNIGHT, District Judge.

This matter comes before the court on a petition to review a decision of the referee in bankruptcy disallowing priority to the claims of four creditors. Execution was issued on a judgment in favor of Hall Bros, on January 25, 1932. The deputy sheriff proceeded to the bankrupt’s place of business and made a levy on the stock and fixtures. No inventory was made, but the goods were left in the store, and judgment debtor’s representative agreed to make payments on the execution. The bankrupt store was allowed to remain open; the business being carried on and merchandise stock being sold and bought as usual. On September 9,1932, January 5, 1933, and January 30, 1933, similar levies were made on executions in favor of Baid’s, Inc., Parker Pen Company, and Mabie-Todd, Inc. As before, a memorandum of the levy was noted on the execution, but the goods were left in the store, which was allowed to remain open for business. Payments on three of these executions were made from time to time. On several occasions, the sheriff was ordered to proceed with a sale of the goods by the attorney for Baid’s, Inc., and Mabie-Todd, Inc. No sale was held, however, and the sheriff reported to the attorney that he thought it best to let the store continue on and be open and was told to use his own judgment. No instructions were given to the sheriff with regard to a sale under the other levies. The petition in bankruptcy was filed on October 2,1933-.

The execution creditors contend that their judgments constitute valid liens against the bankrupt and are entitled to priority, since the executions were issued more than four months prior to bankruptcy. The trustee asserts that the levies were allowed to become dormant and that their priority was lost due to the intervention of bankruptcy.

Under the recent opinion of the Supreme Court in Minnich v. Gardner, 54 S. Ct. 567, 78 L. Ed. -, decided April 2, 1934, a lien procured more than four months prior to bankruptcy is valid as a priority lien, even though it was allowed to become dormant for a period, if later and prior to the intervention of other rights and liens it was revived. In that case it was shown that, although nearly seventeen months had passed since the making of the levy, nine days before the bankruptcy petition was filed the creditor ordered the sheriff to proceed at once under the original levy to advertise for sale and sell the goods held under the levy. In the present ease, although at one time the sheriff was directed to sell the goods held under the lien on the executions of Baid’s, Inc., and MabieTodd & Co., it further appears that the sheriff reported to the attorney for the creditor that he thought it best to let the store continue to be open, and thereupon was told to use his own judgment. By allowing the sheriff to use his own judgment, the creditor allowed the execution to remain dormant, and it remained so until the filing of the petition in bankruptcy. The intervention of bankruptcy destroyed the' priority of the lien, sinc.e the trustee stands in the position of one armed with execution. On the other executions, no instructions were received by the sheriff in regard to the sale of the goods, and thus no claim of revival can be advanced thereon.

The decision of the referee is affirmed.


author: CAFFEY, District Judge.

text:
    UNITED STATES ex rel. DI COSTANZO v. UHL, Acting Commissioner of Immigration.
    District Court, S. D. New York.
    May 8, 1934.
    Paul A. Berlowitz, of New York City, for relator.
    Martin Conboy, U. S. Atty., of New York City (Irvin C. Butter, Asst. U. S. Atty., of New York City, of counsel), for respondent.
   CAFFEY, District Judge.

Belator charges unfairness in the hearing before the immigration service. He alleges that there were two irregularities: (1) that he was deprived of representation by counsel; and (2) that he was deprived of the right of confrontation with witnesses against him.

The facts as established by the record are as follows:

The relator is an Italian. In 1924 he procured from the American consul at Palermo an immigration visa in the name of Salvatore Di Meglio. As the basis for issuance of the visa, he presented to the consul a birth certificate of, and other documents pertaining to, Di Meglio, together with his own photograph. Upon this visa, under the name of Di Meglio, he came into the United States on January 13, 1925. He remained here until December 11, 1930.

On December 9, 1930, desiring to go back to Italy temporarily, he made application for a re-entry permit. In the application he stated that he had lawfully entered the United States in 1925, having reference to his admission at that time under the quota visa issued to him in the name of Di Meglio. He returned, through the port of New York, on the faith of the re-entry permit, on June 19, 1931.

In a warrant issued November 21, 1933, the alien was charged with having been, at the time of his 1931 entry, a quota immigrant who was not in possession of an unexpixed quota immigration visa and to have then been not entitled to entry, for the reason that the re-entry permit which he presented was not valid because it had been procured by fraud or misrepresentation.

The sole testimony at the hearing was given by the relator himself.

The record shows (minutes, pages 2, 3) that the alien was advised that he was entitled to be represented by counsel, and replied that he would not engage counsel. He proceeded to testify freely and without objection on his part. The first objection made in the petition, therefore, is not established.

At the oral argument and in the brief for the relator, effort was made to bring the ease within Roux v. Commissioner of Immigration (C. C. A.) 203 F. 413; but there is no evidence to sustain a claim that he was misled or overreached or otherwise unfairly dealt with.

Whether the alien should be deported turns wholly upon his own statement. The story recited above is from his lips. In consequence, there can be no issue as to the right of confrontation, and the second objection in the petition fails.

Regardless of what had happened between 1925 and 1930, the relator was still an alien, and his return from Italy in 1931 was a fresh entry. United States ex rel. Claussen v. Day, 279 U. S. 398, 49 S. Ct. 354, 73 L. Ed. 758. If that entry was unlawful, then he may be deported on that ground. United States ex rel. Stapf v. Corsi, 287 U. S. 129, 53 S. Ct. 40, 77 L. Ed. 215; United States ex rel. Lamp v. Corsi (C. C. A.) 61 F.(2d) 964.

The re-entry permit was procured solely by the representation that the previous entry was lawful. That representation was false. The 1925 entry was unlawful. McCandless v. Murphy (C. C. A.) 47 F.(2d) 1072. The admission in 1931, therefore, was by the employment of a re-entry permit which had been obtained by a false repreisentation. This rendered the presence of the relator in the country unlawful and subjects him to deportation. United States ex rel. Lamp v. Corsi, supra; United States ex rel. Spina v. Karnuth (D. C.) 3 F. Supp. 774; United States ex rel. Tavilla v. Karnuth (D. C.) 3 F. Supp. 776.

Upon the undisputed facts, the action of the Labor Department was right.

Writ dismissed.


author: COSGRAVE, District Judge.

text:
    Ex parte HARUMI MOTOSHIGE.
    No. 11357.
    District Court, S. D. California, Central Division.
    May 4, 1934.
    J. Edward Keating and Theodore E. Bowen, both of Los Angeles, Cal., for petitioner.
    Peirson M. Hall, U. S. Atty., and Clyde Thomas, Asst. U. S. Atty., both of Los Angeles, Cal., for respondent.
   COSGRAVE, District Judge.

On December 23, 1931, petitioner, an alien and native of Japan, was questioned by the immigration inspector as to his right to remain in the United States. The result of the questioning, in the opinion of the inspector, justified further proceedings and warrant of arrest was applied for, issued, and hearings regularly conducted; the petitioner being represented by counsel. When the ease was considered by the Department of Labor at Washington, where counsel for petitioner were present, it was decided that the Department of State should be asked to make further inquiries into the movements of petitioner through its consular representatives in Japan. 'This was with the knowledge of petitioner and his counsel, as further particulars to facilitate this inquiry were furnished by them. They knew that the investigation was proceeding in Japan in the manner described.

Later, however, the United States Consul at Nagasaki transmitted to the Secretary of State the result of his investigation, stating among other things that inquiry at the prefectural office in the locality designated by petitioner indicated that no passport had ever been issued to him. This letter was not shown to petitioner nor his counsel, but was considered by the Board of Review in their further consideration of the ease. The Board recommended deportation, and warrant was accordingly issued.

Without reciting the evidence presented, it is sufficient to say that it was at least conflicting and fully justified the action taken. Ng Fung Ho v. White, 259 U. S. 276, 42 S. Ct. 492, 66 L. Ed. 938; Ex parte Wong Nung, 30 F.(2d) 766 (C. C. A. 9th); Chin Share Nging v. Nagle, 27 F.(2d) 848 (C. C. A. 9th).

It appears, however, without contradiction that the hearing was had in part, being the consideration of the letter of the consul referred to, in the absence of and without notice to petitioner or his counsel. Although the evidence taken at the hearings regularly held is ample to sustain the action taken, the spirit of the law requires that the fairness of the hearing shall not be open to question. To the extent described this hearing was unfair.

I do not think this result necessitates the discharge of the petitioner, howevér. The ease should be remanded to the immigration authorities for further hearing after notice to petitioner and his counsel, where full opportunity will be given to petitioner to meet, if he is so advised, the report of the United States Consul at Nagasaki. Tod v. Waldman et al., 266 U. S. 113, 45 S. Ct. 85, 69 L. Ed. 195; White v. Wong Quen Luck (C. C. A.) 243 F. 547.

It is so ordered. Exception to injured parties.