author: CHESNUT, District Judge.

text:
    TUBIZE CHATTILON CORPORATION v. WHITE TRANSP. CO.
    No. 5113.
    District Court, D. Maryland.
    Feb. 14, 1934.
    John H. Skeen (of Emory, Beeuwkes, Skeen & Oppenheimer), of Baltimore, Md., and Lewis, Adler & Laws, of Philadelphia, Pa., for plaintiff.
    Thomas J. Tingley and Francis Key Murray, both of Baltimore, Md., for defendant.
   CHESNUT, District Judge.

A motion for a new trial has been made and argued in this ease. It has afforded opportunity for both counsel and court to more fully examine and consider the applicable law.

The result of the trial was a verdict for the plaintiff in the amount of $9,193.73 (including interest) for damages for loss of a part of a shipment of 85 eases of rayon delivered by the plaintiff at Hopewell, Virginia, to the defendant for transportation by motor truck to Bethlehem, Pa. The defendant is a common carrier of merchandise by motor trucks. The cases of rayon were delivered to the defendant’s sub-agent at Hopewell, Va., on April 20, 1932, and the plaintiff was given two receipts therefor, one for 50 cases and one for 35 eases. The receipts were on the printed form of bill of lading called “Uniform Domestic Straight Bill of Lading adopted by carriers in official, Southern and Western territories, March 15, 1922, as amended August 1, 1930.” They are in the ordinary form for railroad transportation and I understand the form is that prescribed by the Interstate Commerce Commission. See In the Matter of Bills of Lading, 52 I. C. C. 671, April 14, 1919.

The whole shipment of 85 eases was safely carried by the defendant’s sub-agent from Hopewell, Va., to Richmond, Va., and there trans-shipped into two separate trucks of the defendant; one containing 60 cases went directly by road to Bethlehem, Pa., and safely delivered its cargo; the other constituting only a partial truck load went apparently with other merchandise through Baltimore to Philadelphia, where the defendant says its terminal station on that route was located, and there unloaded and delivered to a connecting carrier by truck, from whose possession it is said that it was stolen. The defendant’s defence to the claim for its loss is based on the legal proposition that it was safely delivered to a connecting carrier and therefore the defendant had no liability for its safe carriage thereafter.

At the trial the view was taken that from all the evidence in the ease, including the bill of lading and oral testimony, the defendant had contracted for a through shipment and delivery of the eases of rayon. The motion for a new trial is based chiefly on the legal proposition that the bill of lading is a written contract, which on its face limits the liability of the defendant carrier to safe transportation on its own line and absolves it from loss after safe delivery to a connecting carrier; and that parol testimony is not admissible for the purpose of either adding to or changing or varying the terms of the written contract. The view taken at the trial was that it was at least not clear that the bill of lading did so limit the earlier’s liability and that other facts and circumstances in the relations between the shipper and carrier should be looked at to determine what was the actual contract between them. A more extended examination of the law than was possible at the trial satisfies me that the rule adopted was at least not prejudicial to the defendant, and I think is supported by several eases in the Supreme Court of the United States. Atlantic Coast line R. Co. v. Riverside Mills, 219 U. S. 186, 31 S. Ct. 164, 55 L. Ed. 167, 31 L. R. A. (N. S.) 7 (which is the principal authority on the subject); Michigan Cent. Railroad Co. v. Mineral Springs Manufacturing Co., 16 Wall. 318, 324, 21 L. Ed. 297; Ogdensburg & L. C. Railroad Co. v. Pratt, 22 Wall. 123, 22 L. Ed. 827; Mvrick v. Michigan Cent. R. Co., 107 U. S. 102, 1 S. Ct. 425, 27 L. Ed. 325. The federal law is controlling in a case of this kind, which is a question of general jurisprudence. Myrick v. Mich. Cent. R. Co., 107 U. S. 102, 1 S. Ct. 425, 27 L. Ed. 325; 10 C. J. 524

The conflict between the English and the majority of the American eases (the latter including federal eases) as to whether a carrier is liable for loss on the lines of a connecting carrier seems to be really a conflict between what facts or circumstances will be regarded as satisfactory evidence of a contract for a through carriage, on the one hand, or only for proper forwarding by the initial carrier, on the other. Thus in Atlantic Coast Line R. Co. v. Riverside Mills, 219 U. S. 186, at page 197, 31 S. Ct. 164, 166, 55 L. Ed. 167, 31 L. R. A. (N. S.) 7, it is said:

“The general doctrine accepted by this court, in the absence of legislation, is, that a carrier, unless there be a special contract, is only bound to carry over its own line, and then deliver to a connecting carrier. That such an initial carrier might contract to carry over the whole route was never doubted. It is equally indisputable that if it does so contract, its common-law carrier liability will extend over the entire route. * * * The English cases * * * have consistently held that the mere receipt of property for transportation to a point beyond the line of the receiving carrier, without any qualifying agreement, justified an inference of an agreement for through transportation, and an assumption of full carrier liability by the primary carrier. * * * There are American eases which take the same view of the question of evidence thus presented. * * * Upon the other hand, many .American courts have repudiated the English rule which holds the carrier to a contract for transportation over the whole route, in the absence of a contract clearly otherwise, and have adopted the rule that unless the carrier specifically agrees to carry over the whole route, its responsibility as a carrier ends with its own line; and that, for the continuance of the shipment, its liability is only that of a forwarder. The conflict has therefore been one as to the evidence from which a contract for through carriage to a place beyond tbe line of tbe receiving carrier might be inferred.”

The ease then proceeds to discuss and hold valid the Act of Congress of June 29, 1906, ch. 3591, 34 Stat. 584, 595, known as the Carmack Amendment to the Hepburn Bill (49 USCA § 20), which, as is well known, imposed liability for loss on any point of the route in interstate commerce, on tbe initial carrier. See also Roberts, Federal Liabilities of Carriers, vol. I, pp. 683, 686. If the defendant had been a railroad the question could of' course not arise as it would have been determined bv the Act of Congress, but it is clear that the Act does not apply to common carriers by motor trucks although operating in interstate commerce. The defendant, therefore, says its liability should be determined by the majority rule in the United States unaffected by this federal statute, no state statute of Virginia or other state in the interstate carriage having been called to my attention.

Coming now to a closer examination of the provisions of the bill of lading, I am not convinced that, as applied to this transaction, it shows the clear limitation of liability contended for. The following provisions are to be particularly noted. The defendant, the White Transportation Company, is named as the earner. It acknowledges the receipt of the property described — “marked, consigned and destined as indicated below, which said company * * ° agrees to carry to its usual place of delivery at said destination, if on its own road or its own water line, otherwise to deliver to another carrier on the route to said destination. It is mutually agreed, as to each carrier of any or all of said property over all or any portion of said route to destination and as to each party at any time interested in all or any part of said property, that every service to be performed hereunder shall be subject to all the conditions not prohibited by law, whether printed or written, herein contained, including the conditions on the back hereof, which are hereby agreed to by the shipper and accepted for himself and his assigns.”

By the bill of lading the goods were—

“Consigned to R. K. Laros Silk Co. (an agent of plaintiff)
Destination, Bethlehem, State of Penna.
Route -
Delivering carrier — Truck.”

The only contract terms and conditions (printed on the back) which seem to have any possible bearing on the question are:

“See. 1 (a) The carrier or party in possession of any of the property herein described shall be liable as at common law for any loss thereof or damage thereto, except as hereinafter provided:
“Sec. 2 (a) No carrier is bound to transport said property by any particular train or vessel, or in time for any particular market or otherwise than with reasonable dispatch. Every carrier shall have the right in case of physical necessity to forward said property by any carrier or route between the point of shipment and the point of destination.”

Several points are to be specially noted as follows: The bill of lading nowhere contains the provision which was in very general use in bills of lading prior to the adoption of the Carmack Amendment, to the effect “that no carrier shall be liable for any loss or damage not occurring on its own line.” The absence of this express exemption from liability is, I think, not without significance, even though a motor truck company is not by law subject to the effect of the amendment. The clause referred to was evidently left out of the provisions of this uniform bill of lading, intended for railroad carriage, in consequence of the amendment. See In the Matter of Bills of Lading, 52 I. C. C. 682. Another point to be noticed is that there is nothing in the bill of lading to show affirmatively that the place of delivery was beyond the route or line of the defendant. It is a matter of common knowledge that in railroad carriage where this condition exists the line in the bill of lading beginning with the word “Route” customarily contains the railroad route by reference to the names of the several connecting carriers. And this point is perhaps emphasized by the matter in the next line reading: “Delivering carrier — Truck.” Therefore, if we are to be strictly limited in determining what was the contract of the parties to the contents of the bill of lading, it seems to indicate on its face (in connection with the further facts appearing that the freight was prepaid through to destination) that the whole carriage was to be by the defendant, as there is no indication of a connecting carrier for all or any part of the shipment.

However, defendant’s counsel call attention to the above quoted clause which described the contractual obligation as follows: “Agrees to carry to its usual place of delivery at said destination, if on its own road or its own water line, otherwise to deliver to another carrier on the route to destination.” It is said that this phrase limits the liability by showing that the only obligation is to deliver to another carrier, if the destination is at a point beyond the defendant’s ordinary route. This contention meets several difficulties.

In the first place, as a matter of construction, it seems highly doubtful that the Interstate Commerce Commission, in approving this form of bill of lading under which the initial carrier by the Carmack Amendment was liable for the through shipment, could have contemplated that the particular clause was operative to release the initial carrier from liability (except for the Carmack Amendment), and as heretofore noticed, the omission from the bill of lading of the express exemption from liability for default of a connecting carrier, is significant.

Again in order to maintain the point at all the defendant is obliged to offer parol testimony of facts not appearing on the face of the bill of lading to show as a matter of fact that the destination was not on the defendant’s “own road” (it not being contended that the defendant had any water line). The evidence offered by the defendant in this connection was that the defendant did have a motor route which ran from Richmond through Baltimore to Philadelphia, there terminating, as the nearest point to Bethlehem; and that the plaintiff’s agent was aware of this fact.

Defendant’s counsel on the motion for a new trial calls attention to the provisions of the Maryland statutes (Bagby’s 192.9 Supp. to Maryland Code, art. 56, §§ 258-262, as amended by chapter 282 of the Acts of 1933), providing for annual franchise or license fees to be paid by motor vehicles used in public transportation of merchandise or freight operating over Maryland roads or fixed routes, and says that the defendant has complied with this law and thus has an established route through Maryland from Richmond to Philadelphia. However, this was not developed in the proof at the trial and is not properly before me for consideration. But on the other hand there was testimony that the defendant frequently, if not customarily, transported other shipments by the plaintiff directly by another route (than via Philadelphia) to Bethlehem in its own tru'eks; and in fact so transported the major portion of this shipment. And furthermore, although the defendant’s agent did know that at times some merchandise shipped might be sent by way of Philadelphia.and thence forwarded by another carrier, it insisted that the defendant should insure against liability for loss while in the possession of the connecting carrier. It is thus apparent that to establish its contention the defendant is obliged to resort to testimony outside of the bill of lading itself, at least to show the circumstances and conditions, and as the bill of lading does not show that there was to be a connecting carrier it is necessary for the defendant to bring home to the plaintiff by parol testimony knowledge of the facts that there would be a connecting carrier. 10 C. J. 517, § 840. But the same testimony so resorted to by defendant also shows insistence by the plaintiff of the defendant’s assumption of liability over the whole route in those cases, if any, in which there was delivery to a connecting carrier.

Then again it may be observed that the limitation of liability, contended for by the defendant, from the wording of the bill of lading contained in the clause “if on its own road” is literally inapplicable to the defendant’s situation. Unlike a railroad carrier, it had no fixed road or terminus, as it was entirely free to use any public roads from Virginia to Bethlehem, Pa., and in fact did use a road other than via Philadelphia for the major part of the shipment. Defendant’s counsel urges that this expression in the bill of lading has been held in several eases to be a sufficient limitation of liability. Reference is made to the annotation upon the subject in 31 L. R. A. (N. S.) p. 58, from which it will be found, however, that the cases on the particular point are in conflict. And on an examination of a number of eases particularly cited by defendant’s counsel it appears that the limitation of liability was more expressly stated than in this bill of lading. See Teall v. Sears, 9 Barb. (N. Y.) 317; Inhabitants of Plantation No. 4 v. Hall, 61 Me. 517; McEacheran v. Mich. Cent. R. Co., 101 Mich. 264, 59 N. W. 612; Hewett v. Chicago, B. & Q. R. Co., 63 Iowa, 611, 19 N. W. 790. Compare St. John v. Van Santvoord, 25 Wend. (N. Y.) 660.

My conclusion is that if the defendant’s obligation is to be found only in the bill of lading, then its claim of exemption from liability in this ease is not established thereby. If, on the other hand, reference in aid of construction can properly be made to the other facts and circumstances in the ease to determine the real contract between the parties, then it affirmatively appears as a fact that it was the intention and agreement of the parties that the defendant should, as carrier, have liability for the shipment through to ultimate destination. As indicated in the oral opinion at the trial, I also think that the so-called American majority rule which, prior to the Carmack Amendment, exempted the initial carrier from liability for loss beyond its lines on the grounds of public policy, and which was adopted in connection with railroad transportation, should not on the grounds of public policy be applied to carriers of goods by motor truck in view of the different conditions under which they operate.

The motion for a new trial is, therefore, overruled.


source: Caselaw Access Project

author: WOOLSEY, District Judge.

license: Public Domain

text:
    AMREIN FREUDENBERG CO., Inc., v. GARFIELD et al.
    District Court, S. D. New York.
    Feb. 15, 1934.
    Fritz Ziegler, Jr., of New York City, for plaintiff.
    Glass & Lynch, of New York City (Leslie Kirsch and Sydney W. Cable, both of New York City, of counsel), for defendants.
   WOOLSEY, District Judge.

My judgment in this ease is that the plaintiff should have a decree. I wili deal with the details thereof later in my opinion.

I. Perhaps I should first dispose of the question of infringement.

It is argued by the counsel for the defendants that the patent does not properly cover or disclose any design for an appliqué, which is what was made by the plaintiff as shown by Plaintiff’s Exhibit 10, and copied by the defendant as shown by Defendants’ Exhibit A.

The point made by the defendants’ counsel is that the appliqué is not purely a silhouette as is embroidery, but that the raised effect of appliqué puts it into the class of substances involving three dimensions.

I think that this was somewhat of an exaggeration. It seems to me that in appliqué we have the silhouette enriched. That is the essence of the appearance of the plaintiff’s exhibit.

I find that exhibit cannot be considered, properly speaking, as three-dimensional.

II. If, however, it should be considered that appliqué is three-dimensional, then I think that the ease of King Features Syndicate v. Fleischer, 299 F. 533 (C. C. A. 2), would make it appropriate for me to say that a two-dimensional design patent could be infringed by a three-dimensional design copying the patented design.

I am quite aware that the King Features Syndicate v. Fleischer, commonly called the “Spark Plug” Case, was a copyright ease; so was the case of Fleischer v. Freundlich (D. C.) 5 F. Supp. 808, which involved the animated cartoon known as “Betty Boop” and an infringing doll, and in which I followed the “Spark Plug” Case.

It seems to me that a design patent and a copyright, so far as the question of infringement is concerned, do not stand on different grounds, and I say, therefore, without any feeling of hesitation, that the “Spark Plug” Case is a proper authority for me to cite in saying that, if the appliqué is regarded as three-dimensional, nevertheless such appliqué made by another would be an infringement of the plaintiff’s patent, and also that the plaintiff had a right to make appliqué under that patent and to protect such appliqué. In this aspect this cause is quite similar to the case of the “Betty Boop” doll to which I have just referred, for there one of the plaintiffs had a license from the copyright owner to make three-dimensional dolls'representing the two-dimensional animated cartoons which were the copyrighted subject matter in the “Betty Boop” Case. I held the plaintiff doll was protected by the copyright as a three-dimensional embodiment of the copyrighted subject-matter.

III. I now turn to the question of whether the plaintiff’s design was properly patentable. As there has not been any anticipation shown — as I take it an anticipation in a design patent ease would have to be the same design — the question of patentability turns on whether the design of the plaintiff was a sufficient advance over the designs shown in the prior art or involved sufficient departure from them to be regarded as the result of what I may call inventiveness in design.

I have thought about this question a great deal during the trial and the period of its interruption.

I have endeavored to arrive at the philosophy of the matter, and I find myself continually coming back to considerations which seemed important to me from the first, namely, (1) that, as design patents necessarily are very limited in their equivalents and do not occupy a great zone in an art, you have to deal with them somewhat leniently; and (2) that a design patent, as has been stated in some of the cases, necessarily relates— specially a design of this character — to comparatively trivial subject-matter.

Of course, we all know the old saying that “One swallow does not make a summer”; so you could say in a ease of this kind that one daisy, if we call the flower here shown a daisy, does not make a design. It is the way in which the daisies making up this design are placed with regard to each other, with one flower above the other, with a slight apparent tendency to interlock the petals, with petals of different length which are not kept in the same relative position to the perpendicular, but in which the flower has been swung or turned so that some of the shorter petals in the 'lower flower point in a direction different from what they do in the upper flower.

I am frank to say that from the very beginning the design has appealed to me a great deal. It seems to me that, owing probably to the slight changes in the positioning of the flowers which I have just mentioned, there is an impression of movement to the whole design which'makes it seem almost as if the flowers were revolving, or at least as if they were alive. It is difficult to explain these things, but that is the impression this design makes on me. I think it is fair to say, although the question is really a narrow one, that it was a sufficiently ingenious design to be entitled to a patent over the exhibits of the prior art which have been shown to me with such diligence by the defendants’ counsel.

I therefore hold that this is not a mere aggregation of old elements of design, but that it is a new design, and the patent is not invalid for want of novelty and patentability over the prior art.

IY. I now turn to the question of the penalty of $250 which was the subject-matter, in part, of the evidence in the first part of the trial, and of some of the evidence which was taken yesterday afternoon.

The defendants here confessedly ordered the applique, via the United States Lace Corporation which they controlled, from Mr. Strobel. In the story which he told, Mr. Strobel gave me the impression that he was telling in essentials the truth about this matter.

I understand that it is contended that there was not any intentional infringement of the patent, and that after notice by the attorney for the plaintiff on February 23, 1932, of the fact that the design was patented, that the yardage which had been bought from Strobel by the defendants, amounting in all to 260 yards, was most of it secured back by the defendants from the persons to whom they had sold it.

If we had here a case which involved a question of unfair competition, I should, on Mr. Strobel’s evidence, which I believed in preference to that of the defendants’ witnesses, Mr. Bond and Mr. Menzer, find that the defendants got Strobel to manufacture this applique for them, having copied it from the plaintiff’s patented design. I think that is what happened here.

But, in 'so far as its effect in a patent case is concerned, I do not think it followed necessarily that, however unfair their act was commercially, it has been shown that they actually knew of the patent at the time when they made their arrangement with Strobel. Consequently, inasmuch as they did what they could after actual notice of the patent was served on February 23, 1932, to call all the yardage of the pattern which they had sold, and did not make any sales afterwards, I think that the manufacture of their order by Strobel cannot be considered as coming within any zone of actual notice of the patent. Therefore I will not give the penalty of $250 which the plaintiff seeks.

V. Consequently, the interlocutory decree should contain a provision for a permanent injunction and for the appointment of a master to take an accounting of the profits which may have been made by the defendants and the damages which may have been suffered by the plaintiff by reason of small sales here.

In providing for the appointment of a master, there ought to be a provision in the interlocutory decree that, if the parties can otherwise agree, a master should not be appointed, because the indications here are, although I do not feel I have sufficient facts before me to enable me to pass definitely on figures of damages or on the accounting, that certainly the profits were negligible, and, in view of the small amount which the defendants had manufactured through Strobel and sold afterwards, I should think that it is unlikely that the damages could be heavy. It would be unfortunate, therefore, to load a comparatively small ease of this kind in which the plaintiff has made its point with a large amount of costs for the fees and stenographic expenses of a master.

The plaintiff may, of course, have its costs.

VI. This opinion may stand as the findings of fact and the conclusions of law in this case.

VII. The interlocutory decree may be presented to me for settlement on the usual notice, and I will also, as I know about this ease, retain jurisdiction of it until the final decree is entered, and, if there are some small points which the parties feel might be ironed out without going to a master,-1 will allow them to call on me, at any time convenient to me, upon two days’ notice by either party to the other. I think in that way the ease can be disposed of with the least possible friction.


author: JOHNSON, District Judge.

text:
    AMERICAN EQUIPMENT CO. v. TUTHILL BLDG. MATERIAL CO.
    No. 10128.
    District Court, N. D. Illinois, E. D.
    Jan. 18, 1933.
    Townley, Wild, Campbell & Clark, of Chicago, Ill., for plaintiff.
    Albert G. Miller and Taylor, Miller, Busch & Boyden, all of Chicago, Ill., for defendant.
   JOHNSON, District Judge.

Preliminary.

1. A bill of complaint was filed by plaintiff for an accounting for certain royalties alleged to have accrued under a license granted by plaintiff as the owner of certain patents to the defendant, setting forth a royalty of 30 cents per thousand for brick, all of which was paid, and a royalty in addition thereto of $1.50 and $3 per thousand for excessive use of plaintiff’s device.

2. The defendant’s answer is that the said license contract was void by reason of the fact that the parties thereto violated the anti-monopoly laws of the state of Illinois and the Sherman Anti-Trust Law.

3. The facts were found by the master, and certain exceptions filed by each of the parties to the suit, are hereby overruled.

4. The cause was referred to the master for the purpose of making findings of fact, and under the order of reference the master was not called upon to state conclusions of law. The case comes before the court upon the master’s report containing findings of fact.

The court approves and confirms the master’s report, and his findings of fact will take the place of the findings of fact required by the Equity Rules (28 USCA § 723), and the facts will be referred to by the court only in so far as they are pertinent to reach a proper conclusion as to the law.

Conclusions of Law.

Briefly stated, the plaintiff was the owner as assignee of letters patent covering an apparatus for handling, setting, listing, and transferring brick, under patents No. 1,205,562 and 1,150,061, covering what is known as the brick-setting machine, and patent No. 1,474,806, covering what' is known as a brick loading fork.

Since 1916 the defendant has been a licensee of plaintiff. It is necessary to consider the facts which have to do with the history of the brick industry of Chicago. The court considers this evidence as material, and its consideration is proper under the authority of United States v. Lake Shore & M. S. Ry. Co. (D. C.) 203 F. 295, 307, where the court said: “They forcibly urge that what was done prior to the March agreement has nothing to do with what has been done since. Objections were continuously made to the introduction of evidence tending to show conditions existing before the agreement. Complainant insists that what followed the execution of the March agreement was but a continuation of what preceded it. The fact that we have considered the evidence shows, of course, that we regard it as admissible. It cannot escape notice that some of the defendants were parties to such earlier transactions, and that others acquiesced in and adopted such transactions before the March agreement was made. Lincoln v. Claflin, 74 U. S. (7 Wall.) 132, 138, 19 L. Ed. 106; United States v. Standard Oil Co. (C. C.) 152 F. 290, 294, per Sanborn, Circuit Judge, and Circuit Judges Van Devanter, Hook, and Adams concurring. The acts and transactions of the first period therefore ought to aid in some measure to elucidate the intent and effect of the March agreement, and of the acts and transactions of the parties since, no matter what conclusion may be reached touching the second period. Standard Oil Co. v. U. S., 221 U. S. 1, 76, 31 S. Ct. 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734; Darius Cole Transp. Co. v. White Star Line, 186 F. 66, 108 C. C. A. 165 (C. C. A. 6th Cir.); U. S. v. E. I. DuPont De Nemours & Co. (C. C.) 188 F. 128, 134.”

This applies to the facts here.

The manufacture of brick is an old industry. Due to bulk, it cannot be manufactured and delivered profitably in an area outside of sixty miles from the center of Chicago. In the Chicago area, in the years 1900 to 1909, there were periods of keen competition and other periods when the price was controlled by pools. When competition was active, the price of brick varied from $3.75 to $5 per thousand, and, when competition was stifled, as happened at times in this period, the price of brick was stabilized at from $9 to $10 per thousand. In 1900 the Illinois Brick Company was formed and acquired the plants and assets of most of the operating brick companies in the Chicago area. The purchase price was paid for by the issuance of stock in the Illinois Brick Company. Some of the yards it operated; others it dismantled and abandoned. Later a holding company was formed under the name of the Cook County Brick Company. This company leased and operated various of the brick plants in and around Chicago, but this plan was soon abandoned. In the same period indictments were returned against the representatives of the brick companies operating in the Chicago-district charging violation of the Sherman Anti-Trust Law (15 USCA §§ 1-7, 15 note), and as a result of these indictments fines were paid by the defendants. Thereafter there was renewed competition among the brick manufacturers, which caused the price of brick to-drop to $4.50 per thousand.

In the year 1905 and 1906 a corporation was formed known as the Central Brick Company. It received all orders for common brick in the Chicago area, and parceled out the orders among various brick manufacturers. Under this plan the price of brick was stabilized at from $9 to $10 per thousand. After approximately two years, the Illinois Brick Company withdrew from the Central Brick Company, and this plan of marketing brick was thereafter abandoned. Competition again became keen, and the price of brick dropped from $5 to $6 per thousand. At this time R. C. Penfield, then president of the American Equipment Company, plaintiff herein, began negotiations with the various Chicago brick companies, some twenty-three or twenty-four in number. Plaintiff then owned the machine referred to as the brick-setting machine, representing that a great saving in cost and labor could be effected, and through license agreements plaintiff could regulate the production and price in common brick. He represented under license agreement that this could he done, and that he would have the right and authority to do so. After various conferences, the Illinois Brick Company, the National Brick Company, the Carey Brick Company, and five other large manufacturers were persuaded and did sign license agreements. These license agreements provided, among other things, that the brick manufactured by the licensees should be sold at the fixed price of $6 per thousand in the Chicago area for wagon delivery, unless otherwise fixed by agreement by the majority of the licensees. Under this contract each licensee was given a fixed quota of percentage of what it determined to be the total of the Chicago brick business, and each licensee in turn agreed what its quota of productions should he. Plaintiff investigated each of the yards of the licensees to determine the capacity of the respective yards. In 1911 and again in 1914 plaintiff prepared and had executed by the licensee a new form of license agreement, Defendant’s Exhibits 7 and 14. '

In 1925 still another Eeense agreement was presented by the plaintiff in which all reference to the price of brick was eliminated.

The quotas assigned to the various Chicago brick companies by the plaintiff in the 1911 contracts were in part as follows:

The quotas assigned to the various Chicago brick companies by the plaintiff in the 1914 contracts were as follows:

After 1909, the Illinois Brick Company from time to time purchased the following named Chicago brick companies; La Bahn Brick Company; Wisconsin Lime & Cement Company; Calumet Brick Company; Kemnitz Brick Company; Glenview Brick Company; and Harms Brick Company. The Illinois Brick Company also purchased the Curtis Brick Company, which had previously purchased the Manteno Brick & Tile Company and the Murphy & Lorimer Brick Company. The Illinois Brick Company, for a number of years prior to 1931, had been operating only about ten brickyards. The Builders’ Brick Company was purchased in 1928 by the National Brick Company.

In the winter of 1915, or early in 1916, J. B. Tuthill, president of the defendant company, submitted his resignation to the Illinois Brick Company, for which he had been working, and began to build the brickyard now owned and operated by the defendant. At that time R. C. Penfield, president of the plaintiff company, visited J. B. Tuthill on several occasions, and told him that there were too many brickyards already; that Pen-field could do better by him if he would not build a yard; that Penfield would see that Tuthill would get $50,000 if he would not build a yard. This offer was repeated on several occasions, and was refused by Tuthill. Later in 1916 Penfield urged J. B. Tuthill, then president of the defendant company, to sign a Eeense agreement with the plaintiff, and told Tuthill that Penfield could stop the companies who were ambitious to sell aE the brick in Chicago by increasing the “additional sum” due to the plaintiff for deliveries over such company's quota to $3 a thousand; that the agreement would stimulate and keep up the price of brick; that no brick company could afford to sell brick for less than the prevailing market price, and at the same time be penalized $3 per thousand brick sold; that the additional sums collected from the companies who overproduced and distributed to those who did not produce their quotas was satisfying them. R. C. Penfield, on behalf of the plaintiff, offered to exempt the defendant from the payment of the “additional sums” of $1.50 and $3 as described and defined in the 1914 printed form of Eeense agreement as to aE deliveries of brick less than 35,000,000 brick per year if the defendant would sign a Eeense agreement. This provision was later incorporated into an agreement which was duly executed in the fall of 1916 by the plaintiff and defendant and is in evidence as Defendant’s Exhibit 7.

After defendant signed the license agreement, plaintiff advanced to defendant $13,-943.95 for the remodeEng and alteration of the defendant’s brickyard, the obligation to be canceled as a debt when royalties in Eke sum had been paid. This money was, in effect, contributed to tbe defendant to induce it to sign tbe license agreement. Tbe debt was duly canceled when tbe royally payments by defendant reached such sum.

In 1925 plaintiff caused tbe license agreement mentioned in finding No. 3 to be prepared. License agreements in this form were entered into between tbe plaintiff and tbe defendant and the other licensees who were permitted by the plaintiff to manufacture and deliver such percentages of tbe brick deliveries of “the first five licensees” as is set opposite tbe names of snob brick company in tbe column beaded “Percentages” :

The prevailing market price of common .brick in tbe Chicago area market did not vary from $12 per thousand from September, 1921, to May of 1931. All tbe licensees of tbe plaintiff maintained this price uniformly over this period of time. Por the period from 1915 to 1930 the average net profit made by brick manufacturers in tbe Chicago area was approximately $1.50 per thousand delivered.

During tbe period from September, 1921, to September, 1931, tbe prices of crushed stone, torpedo, sand, and cement in tbe Chicago Illinois market varied widely and fluctuated continually. Defendant’s Exhibit 1.

The brick-setting machine bad nothing to do with tbe shaping or forming of brick. It. was exclusively a machine for handling brick after it bad been formed. Tbe cost of tbe brick-setting machine varied from $1,200 to $2,000; tbe latter figure being tbe highest during the World War. The machine bad a long life, tbe original machine being still in use, and tbe title to it was always retained in tbe licensor, but tbe upkeep thereof was at tbe cost of tbe licensees. Tbe machines were useful. Tbe defendant’s brickyard has a daily capacity of approximately 300,000 brick. To set this number of brick by band without tbe use of plaintiff’s patented machinery 36 skilled workmen would be required, and the labor cost based on the union wage scale prevailing would be $300 per day. Tbe same number of brick can be set by plaintiff’s setting machine by 12 unskilled workmen at a labor cost of $83.92, exclusive of royalty. Thus tbe saving in labor cost which results from the use of plaintiff’s patented brick-setting machine amounts to $216.08 per 300,000 brick where the production is maintained at that amount each day. To the labor charge of $83.92 there must be added $5 for power, making tbe cost of labor and power $88.92 per 300,000 brick, a saving of $211.08 over labor and cost without tbe u§e of plaintiff’s machinery or 70.36 cents per thousand. From this figure tbe royalty of 30 cents per thousand must be deducted, resulting in a net saving of 40.36 cents per thousand brick at full capacity of 300,000 brick per day. Tbe delivery of brick by defendant has varied from the high point in 1925 of 78,507,925 brick to tbe low point of 11,167,412 brick in 1930. Tbe defendant’s net saving in tbe use of tbe machine over setting by band during the years 1929' and 1930, based on its actual output, was 23 cents per thousand. Tbe “additional sums” of $1.50 and $3 per thousand have been ignored in computing these savings. During all tbe years that plaintiff bad oVned this patent it has been able to procure licensees onty in the Chicago area, the New York area, and in one plant in Milwaukee.

Plaintiff contends that under tbe 1925 agreement, the one before tbe court, it could do legally all of tbe things that it contracted to do under the monopoly of its patents, and in support of its position cites Rubber Tire Wheel Co. v. Milwaukee Rubber Works Co. (C. C. A.) 154 F. 358. With this tbe court cannot agree, for tbe reason that the ease dealt with the product of the patent and plaintiff’s device deals with a commodity, which cannot be tbe subject-matter of a patent monopoly, and has to do only with the handling thereof.

Defendant contends that plaintiff’s license agreement limited the licensees therein to the manufacture of brick to be handled only by the brick-setting machine, and contended further that, inasmuch as the contract provided for the payment of royalty of 30 cents per thousand, upon “brick manufactured and delivered,” the licensees could not manufacture brick in excess of their quota without becoming liable for payment of royalty. With this contention the court 'cannot agree. It should be noted, however, in this connection, that all the yards of all of the licensees were specially equipped for handling the brick manufactured by the brick-setting machine; that they bad no skilled organization necessary for the manufacture of brick by tbe old “bandsetting” method, and, by reason of tbe uncertainty of what their quota could amount to, it was not practical for them to manufacture by the old handsetting method without the use of the machines, and for the further reason that their brick kilns were not constructed in a manner suitable to that method.

The court, therefore, concludes that the practical effect of this arrangement was to limit the manufacture of brick by the licensees to the method of machine setting by use of plaintiff’s device. In this connection it is necessary to consider the volume of the brick business controlled by plaintiff’s licensees which amounted to 90 per cent, of all of the briek in the Chicago area.

By reference to Plaintiff’s Exhibit A, it will be noted that in the years of active building operation in Chicago the annual sale of plaintiff’s licensees approximated • a billion bricks. As to the independent manufacturers who contributed not more than 10 per cent, of the brick used in the Chicago area, there is some evidence to show that they undersold plaintiff’s licensees using the hand-setting method by $1 per thousand.

Whenever any one of the licensees exceeded their quota, they paid $1.50 per thousand additional royalty. The contract provided that, if they persisted in their overproduction, at the option of the licensor, this could be increased to $3 per thousand. The licensor collected these overages and turned them over to licensees who underproduced. The Illinois Brick Company since 1922- was chronically under this quota, so that in that period ending 1930 it received royalties, based on $1.50 per thousand (manufacturer’s profit on the briek), $678,578.71, and that the total amount paid by licensees who overproduced their quota in the same period was $716,363.58, the difference in amount being divided among four companies.

In 1914 the Illinois Briek Company’s quota was 57.5 plus per cent. By the acquisition of other yards its quota was increased so that under the 1925 contract it was increased to 62 per cent.

After 1909 the Illinois Briek Company began to buy up independent brickyards. Some of these were already licensees of the equipment company, others were not. Among those bought by the Illinois Brick Company were the Wisconsin Lime & Cement Company, Calumet Briek Company, Kemnitz Briek Company, the Glenview Brick Company, and the Harms Brick Company. The Murphy & Lorimer Brick Company and the Manteno Briek & Tile Company were purchased by the Curtis Brick Company, and thus enlarged the Curtis Briek Company, and itself was purchased by the Illinois Brick Company. Some of the plants purchased were never used. These facts must be regarded as significant, the chronic underproduction of the Illinois Briek Company is noted, by reason of which it received in eight years a cash bonus for its underproduction of $678,578.71. It is also significant that the plaintiff licensor had been able during all of the years to introduce its brick-setting machine only in the New York and Chicago areas, with the exception of one yard in Milwaukee, and this notwithstanding the fact that common brick are manufactured in substantially all parts of the United States in huge quantities; that R. C. Penfield, the president of the company, withdrew from 1916 to 1920, from the plaintiff corporation, a total sum of $481,227.64, which was written off by resolution of the board of directors because its president had spent the money on behalf of the plaintiff company and its licensees, and also that some of the money was recovered by plaintiff from its licensees, and for a further reason — that the debt was absorbed by the company because Penfield, its president, had spent the money in furthering the interest of the company by way of advertising, promotion, and entertaining, and in connection with federal and state investigations. No evidence appears in the record of any actual advertising or promotion work.

Plaintiff contends that the court is limited in its consideration of this ease to the naked terms of the contract. This was not a contract merely between the parties to this suit. It bound all the licensees together as to the limited use of plaintiff’s device. An elaborate system of reports and audits maintained by plaintiff made it possible for each of the licensees almost daily to know what the other licensees were producing and selling. If plaintiff’s contention were true, then it would be difficult for the courts to ever reaeh a condition where the State Anti-Monopoly Laws (Smith-Hurd Rev. St. Ill. 1933, c. 38, § 569 et seq.) and the Federal Sherman Anti-Trust Law (15 USCA §§ 1-7, 15 note) are violated. To reaeh a proper conclusion, it is necessary to view all that the parties did under the contract and to ascertain the purpose and intent of the parties in view of the past history of those who have entered into the enterprise, as stated by the court in U. S. v. Lake Shore & M. S. R. Co. supra. Looking back then over the history of thirty years in this industry, and finding the constant purpose of the men engaged in that industry to stifle competition and control priees, a court would be blind indeed if it said no inference is to be drawn from that. Light is shed upon the purposes that were in the mind of the plaintiff and its licensees when it is noted that the patent monopoly that the plaintiff owned and was entitled to under its patents was not extended beyond the New York and Chicago areas. Also that the natural impulse of owners of patent devices is to secure profit from royalty. A natural course of conduct would have been to have leased its appliances to whosoever would use them and to be content with the royalty paid, without becoming a business partner of its licensees as it did in the instant case.

While it is true, as contended by plaintiff, that the owner of a patent may grant or withhold its sale or use as it sees fit, it may not do those things whieh extend its patent monopoly beyond tbe monopoly granted by the patent laws, and the patent monopoly will not make it immune against violation of either the State Anti-Monopoly Law or the Sherman Anti-Trust Law. Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, 33 S. Ct. 9, 57 L. Ed. 107. There is an abundance of authority that may be cited in support of this principle of law.

The maintenance during this long period of time of the fixed profit of $1.50 per thousand, and the fixed price to the brick consuming public of $12 per thousand, viewed in the history of this industry, is more than a coincidence, and was brought about by other means than the use of the patent devices.

Plaintiff has shown that the cost of brick in Chicago was mueh lower than the cost of brick in other cities, whieh appears in Plaintiff’s Exhibit N. This, it may be noted, was true by reason of the favorable clay conditions around Chicago whieh are suitable for brick-making purposes in an economical way, and it is no answer to the charge made by the defendant in this case.

All of this, coupled with the fact that the principal licensee, the Illinois Brick Company, bought up yards which it never used and increased its quota beyond what it could possibly sell, so that without having sown it reaped a harvest of $678,578.71. An item of the plaintiff company shows that its president expended the sum of $481,227.64 for advertising, entertaining, and promotion, where its customers were limited to a number that its officers could remember without resorting to their books and dealt with daily. The fact that a portion of these funds were expended in connection with state and federal investigations leads one to ask why the owner of a patent should extend its interest to federal and state investigations if its practices were within the law and its business was transacted witbin tbe scope of its patent monopoly?

The law which must govern in this ease is well expressed in U. S. v. Reading Co., 226 U. S. 324, 357, 33 S. Ct, 90, 98, 57 L. Ed. 243:

“It is not essential that these contracts, considered singly, he unlawful as in restraint of trade. So considered, they may be wholly innocent. Even acts absolutely lawful may be steps in a criminal plot. Aikens v. Wisconsin, 195 U. S. 194, 206, 25 S. Ct. 3, 49 L. Ed. 154, 160. But a series of such contracts, if the result of a concerted plan or plot between the defendants to- thereby secure control of the sale of the independent coal in the markets of other states, and thereby suppress competition in prices between their own output and that of the independent operators, would come plainly within the terms of the statute, and, as parts of the seheme or plot, would be unlawful. Thus, in Swift & Co. v. U. S., 196 U. S. 375, 396, 25 S. Ct. 276, 49 L. Ed. 518, 524, where a plan or seheme consisting in many parts or elements was averred to constitute a combination forbidden by the act of July 2, 1890 [15 USCA §§ 1-7, 15 note], it was said:
“ ‘The seheme as a whole seems to us to be within reach of the law. The constituent elements, as we have stated them, are enough to give to the seheme a body, and, for all that we can say, to accomplish it. Moreover, whatever we may think of them separately when we take them up as distinct charges, they are alleged sufficiently as elements of the scheme. It is suggested that the several acts charged are lawful and that intent can make no difference. But they are bound together as the parts of a single plan. The plan may make the parts unlawful.’ ”

Also Standard Sanitary Mfg. Co. v. U. S., 226 U. S. 20, 48, 33 S. Ct. 9, 14, 57 L. Ed. 107:

“The agreements clearly, therefore, transcended what was necessary to protect the use of the patent or the monopoly which the law conferred upon it. They passed to the purpose and accomplished a restraint of trade condemned by the Sherman law. * * * The Sherman law is a limitation of rights,— rights whieh may he pushed to evil consequences, and therefore restrained.
“This court has had occasion in a number of eases to' declare its principle. Two of those cases we have cited. The others it is not necessary to review or to quote from except to say that, in the very latest of them, the comprehensive and thorough character of the law is demonstrated and its sufficiency to prevent evasions of its policy “by resort to any disguise or subterfuge of form,’ or the escape of its prohibitions ‘by any indirection.' United States v. American Tobacco Co., 221 U. S. 106, 181, 31 S. Ct. 632, 55 L. Ed. 663, 694.”

It is unnecessary to refer to the other cases announcing the same principles of law.

The conclusion is inescapable that the plaintiff and its licensees, including the defendant, were engaged in a conspiracy to violate the criminal laws of the United States as well as the state of Illinois. Its plans are “liveried in legal form,” but its history and its practice sheds a light which shows the parties naked before the law, and they may be seen as they actually exist working in a conspiracy in restraint of trade and to control prices. Plaintiff cannot have the aid of this couil; to enforce the penalties provided for in its contract and designed to make effective the conspiracy the licensor and licensees were engaged in.

The Illinois statute makes this contract void, and, since the record shows the shipments were made out of the state, the Sherman Anti-Trust Law (15 USCA §§ 1-7, 15 note) was violated. A court of equity will refuse its aid to the parties involved for a much higher moral reason, in that it will not undertake to adjudicate the rights of parties who have been engaged in an enterprise outside of the law, and will leave the parties where it found them.

There are no equities in favor of the defendant. By its own position it stands convicted before the law, and for that reason it will not be awarded costs.

Counsel may present a decree dismissing the plaintiff’s bill for want of equity, each party to pay its own costs.


author: GODDARD, District Judge.

text:
    THE JAMES W. FOLLETTE. THE I. L. I. 105. COYNE v. ERIE & ST. LAWRENCE CORPORATION.
    District Court, S. D. New York.
    Aug. 28, 1932.
    Macklin, Brown, Lenahan & Speer (by J. Dudley Eggleston), of New York City, for libelant.
    Stanley & Gidley (by Arthur E. Otten), of Buffalo, N. Y., for claimant.
   GODDARD, District Judge.

This suit is brought by libelant, Ross Coyne, against the motorship I. L. I. 105 to recover damages alleged to have been sustained on November 6, 1928, at about 12:15 a. m. to the steam canal boat James W. Follette when it is alleged the suction of the I. L. I. 105 negligently caused a stone scow to come in contact with the Follette. The place where it occurred was On the New York State Barge Canal some 300 feet east of Bridge No. E-192 or about a mile west of Hulberton, N. Y. At this point the canal is approximately 75 feet wide and 10 to 12 feet deep. The north bank is of rock and nearly perpendicular, and the south bank is of dirt and somewhat inclined. At the time there was a strong current flowing easterly at the rate of one to two miles an hour.

The Follette is a steam canal boat 96 feet long and 17.6 feet wide. She was about three-quarters loaded and had in tow six barges; four of them were half-loaded and the other two were light. The Follette was pushing one barge and towing the remaining five, which were closely coupled in tandem on a hawser 350 feet long.

The No. 105 is a twin screw steamship 254 feet long and 36 feet beam, with a draft about 9 feet and 3 inches, and was equipped with 180 H. P. diesel engines. Both the Follette and the No. 105 were west bound.

Shortly before midnight of November 5th, as the No. 165 was overtaking the Follette and when two or three hundred feet astern of the last boat of the Follette’s tow, the No. 105 blew a two-wbistle passing signal to the Follette; her master believing that as they were nearing a bend in the canal it was not a good place for the steamer to attempt to pass, replied with an alarm signal. After rounding the bend, the No. 105 blew another tvto-whistle signal, to which the Follette replied with two whistles and pulled over close to the starboard bank so as to let the No. 105 pass on the Follette’s port side. The Follette had slowed down to about one-half mile an hour, just enough to maintain steerage way; and the No. 105 proceeded to pass at the rate of about two miles an hour. While the No. 105 was passing the tow, the suction or interaction produced by the No. 105 caused the hawser to slacken and the forward barges to jump against each other and the tow to get out of shape, and the No. 105 put a line to the Coyne, the hawser boat, backed up, and finally got the boats in shape again. The No. 105 again proceeded to pass the tow. Soon after the captain of the Follette saw about 50 feet ahead of him a stone scow moored to the starboard bank. There was a lantern on the scow, but the light was not visible until he neared it, as it was hidden by a pile of stones 7 or 8 feet high on her deck. As soon as the scow was observed the captain of the Follette blew an alarm and the captain of the Coyne shouted to those on the steamer warning them of the barge. The stone scow was estimated to be 22 to 30 feet wide and 60 to 75 feet long. The Follette continued on slowly; her push boat had gotten beyond the scow and she had cleared it by some few feet and as the No. 105, which had kept on notwithstanding the alarm and warning, was passing the Follette, the stone scow was torn loose from her moorings by the suction and interaction produced by the No. 105 and rammed against the rudder and steering gear of the Follette putting her out of commission. The Follette came to a stop 50 to 75 feet beyond the scow and the No. 105 a short distance beyond her. Upon going back to investigate, it was found that a line from the lower end of the scow, about 100 feet long that had been made fast to an iron bar about 4 feet long and 1% inches in circumference which had been driven into the ground, bad pulled out so that although a line from the upper end of the scow which was made fast to a large derrick held, the scow was drawn along by the suction of the No. 105, as the boats in the tow had been when the No. 105 passed by them, until it collided with the Follette.

The defense was set up in the answer that the Follette backed into the scow, and there was some testimony to that effect; but after hearing and seeing the witnesses, I am left with no doubt that this was not so. And I am quite convinced that when the captain of the Follette discovered the stone scow he felt that the safe thing was to get his entire tow past it before the No. 105 attempted to pass him and that with this in mind he blew the alarm signal and proceeded on.

There may be a question as to whether the scow was propezly moored, although there was testimony that it was moored in a maimer usual along the canal. But it seems to me that it was negligence for the No. 105 to have continued on in face of the alarm and warning and attempt to pass the Follette at this point. The canal was only 75 feet wide and the combined width of the No. 105, Follette, and scow was 65% feet or 73% feet, depending upon whether the scow was 22 feet or 30 feet wide as testified to. The captain of the No. 105 admitted that he passed within 6 feet of the scow and of the Follette. It is well known that the suction or interaction of the water produced by a vessel as large as the No. 105, 254 feet long and 36 feet beam with a draft of 9 feet and 3 inches, in a canal not more than 10 or 12 feet deep, is likely to cause serious trouble for smaller craft iu her vicinity. With these three vessels abreast almost, all the water was excluded from the canal at that point, and as the two larger ones passed on the water rushing in to fill the vacant space would create a powerful draft, although they were not moving at a high rate of speed. For the No. 105 to have attempted to pass the Follette at that point and under those conditions seems to have been subjecting the Follette to danger, and as the Follette warned her against it, the risk was assumed by her and she should he held liable for the damage which followed.

In The Mesaba (D. C.) 111 F. 215, 223, Judge Brown said: “The Mesaba as an overtaking vessel was hound to keep out of the way of the Martello (article 24), and took whatever risks attended the attempt to pass where she did, whether arising from the narrowness of the channel, the shallowness of the water, suction, the tide, or any other causes except those arising from the fault of the Martello herself * * Northern Nav. Co. v. Minn. Atlantic Transit Co. (C. C. A.) 49 F.(2d) 203. See, also, The Sir (D. C.) 181 F. 412; Atlas Transportation Co. v. Lee Line Steamers (C. C. A.) 235 F. 492; The Henry W. Oliver (D. C.) 202 F. 306.

Accordingly, libelant may have a decree with the usual reference as to amount of damage.


author: BOURQUIN, District Judge.

text:
    BINSFIELD et al. (CONRAD MINERALS CO. et al., Interveners) v. JOHNSON et al.
    No. 1492.
    District Court, D. Montana.
    Feb. 26, 1934.
    M. S. Gunn, of Helena, Mont., for plaintiffs.
    Murch & Wuerthner, I. Parker Veazey, Jr., and Molumby, Busha & Greenan, all of Great Falls, Mont., and W. T. Pigott, of Helena, Mont., for intervener Jos. Wright.
    R. J. Reynolds, of Great Falls, Mont., for intervener Conrad Minerals Co.
    R. J. Reynolds, I. Parker Veazey, Jr., and Molumby, Busha & Greenan, all of Great Falls, Mont., and W. T. Pigott, of Helena, Mont., for interveners Jonas F. Reitz and others.
    John G. Brown, L. V. Ketter, and John C. Erickson, all of Helena, Mont., and W. F. O’Leary, of Great Falls, Mont., for defendants.
   BOURQUIN, District Judge.

Defendants’ motions to dismiss, in legal effect, admit the allegations of the complaint, and in consequence the case is as follows.

In Great Falls the Conrad State Bank, insolvent to a degree requiring enforcement in full of stockholders’ “double liability,” closed March 4, 1933, and defendant Frank H. Johnson, superintendent of banks, with his aids proceeded to liquidate it.

The usual depositors’ committee materialized, and procured 93 per cent, of depositors to sign a plan to reorganize and reopen, but the plan failed. Thereupon, without any new mandate or authority the committee, in confederacy with the superintendent and certain stockholders of Conrad, formulated another plan following, viz.:

The Montana State Bank would he organized of 1,000 shares of $100 each, for which some of Conrad’s stockholders would subscribe and pay $125,000. Payment would be $45,000 money, of which defendant Bremer would pay $25,000, and release of Bremer’s claim against Conrad for $80,000. Thereupon the superintendent, who theretofore had assessed Conrad stockholders’ full liability and collected some of it, out of Conrad assets would pay the $80,000 to Montana, and release all liability of Conrad stockholders subscribing for Montana stock.

Bremer owned 1,735 of Conrad’s 2,500' shares of $100 eaeh, and subscribed for 840 shares of Montana. His claim aforesaid was for money paid by him to Conrad many months before it closed, in compliance with the superintendent’s order to make good impaired capital.

Bremer would pay Carley’s note for $16,-000 to Conrad, and secure payment of any balance unpaid of Armada’s note for $44,500 to Conrad. Armada was of Conrad stockholders, and the usual affiliate to “do the dirty work” and afford an alibi.

And Bremer’s Montana shares would be trusteed, to be returned to him September 1, 1938, save to any extent necessarily applied to pay in full Conrad depositors. Furthermore, Bremer’s performance would release the liability of defendant G. J. Johnson in respect to his 109 shares of Conrad stock.

The superintendent would transfer the better and liquid assets of Conrad, including more than $89,000 money and in amount $439,417 minimum value, to Montana. Upon its books Montana would credit to Conrad public depositors, 100 per cent, in amount $55,054, to Conrad private depositors, 50 per cent, in amount $377,050, of $754,100, and pay the same on demand.

A Conrad stockholder, defendant Larson, would be president of Montana, one of the superintendent’s aids, defendant Sauer, would be its vice president and cashier, and both with another Conrad stockholder would be of Montana’s board of five directors. This plan as “fair and just” to assist liquidation and to make “available as speedily as possible not less than 50%” to creditors, the superintendent recommended to the local court, which approved it, and execution followed.

Within six days after the approval, the superintendent transferred Conrad assets to Montana, on collection of some of them Montana realized a profit of $8,410, had $319,442 money and $246,073 in other form of said assets, and opened for business; and as agreed it paid to Conrad depositors including plaintiffs.

The superintendent retained “unacceptable assets” of Conrad of “book value” $750,-000, for liquidation.

In Great Falls are two national banks, and the superintendent will permit but one state bank, the latter for that reason part of a valuable monopoly.

Jurisdiction of the suit is based on diverse citizenship; plaintiffs who sue in behalf of all, and interveners, are depositors of Conrad, and defendants are the superintendent and his aids, the banks, and some the latter’s stockholders and officers.

The relief sought is accounting and restitution.

That is to say, the suit is the familiar proceeding by cestuis que trustent against trustees and participants to constrain them to account and respond in respect to property misappropriated in breach of trust.

The motions to dismiss are for that (1) there is not jurisdiction of the subject-matter, and (2) the facts alleged do not constitute a cause of action.

Montana has the usual banking code, which invests the superintendent with usual broad powers. 20 Sess. ch. 89. Amongst other things, he is authorized “with the consent of the court having jurisdiction of such liquidation to compromise, settle and compound claims for stockholders’ liability and such settlements and compromises when approved by the court shall be legal and binding upon all parties concerned including creditors.”

The proceeding is administrative rather than judicial, and ex parte; for although notice to the bank is prescribed in respect to compromise of debts to or claims by the bank and sale of assets of the bank, stockholders’ liability is not of either category.

In support of their motions defendants contend that the superintendent’s acts approved as aforesaid are closed to judicial inquiry, and that plaintiffs are estopped by accepting payment from Montana.

Conrad’s assets and its stockholders’ liability are a trust fund for its depositors and stockholders as beneficiaries, and thereof the superintendent is statutory trustee. His obligation is that of all trustees, statutory or not, to administer the trust with utmost honesty and good faith, reasonable skill, diligence, and discretion in behalf (1) of the depositors, and (2) of the stockholders. And for his failure to the damage of any beneficiaries, like any trustee he can be summoned by them to account.

Of this duty no statute can relieve him; of this right no statute can deprive them. Whatever the intent of the code wherein it provides that the court’s approval “shall be legal and binding” upon creditors, it is impotent to deprive them of a remedy against a defaulting superintendent-trustee, lacking as it does the due process assured by the Constitution, state and national.

The superintendent’s duty to depositors is primary, to stockholders is secondary.

Until depositors are paid with interest in full, not a nickel of the trust funds can he legally divert to stockholders, nor can he legally for a single day hinder and delay payment to depositors in order to benefit stockholders.

Does he proceed illegally in either respect aforesaid, it is fraudulent in law, and for any damage in consequence to depositors, he and any benefiting by the fraud are bound to account.

And though the court approves, the illegal is not made legal, the fraudulent transaction is not purified, the depositors are not debarred of their remedy. Even a judgment to like end would not protect him, and the order of approval of less dignity is so far a nullity it may be ignored.

It suffices to invoke equity to wrest the fruits of the fraud from those who received them, and/or to charge the trustee’s account therewith in any court securing jurisdiction of their persons. See McDaniel’s Case, 196 U. S. 415, 25 S. Ct. 369, 49 L. Ed. 533; Smith v. Smith (C. C. A.) 224 F.1. See, also, First, etc., Bank v. Flershem, 296 U. S. 504, 54 S. Ct. 298, 78 L. Ed. 465, Jan. 8, 1934. Northern, etc., Co. v. Boyd, 228 U. S. 482, 33 S. Ct. 554, 57 L. Ed. 931.

These general, familiar, and comprehensible principles in mind, it prima, facie appears has been abuse of the trust to the damage of the depo‘'itors-benefieiaries, and that this court has jurisdiction to grant the accounting demanded. "

It was the duty of the superintendent to liquidate and pay depositors, and without reasonable explanation or cause he shifted it to Conrad stockholders and their alter ego Montana, to their enormous gain and to depositors’ equal loss.

To said stockholders and bank he transferred assets of Conrad depositors as follows:

In return the depositors received payments as follows:

Balance struck, the loss to depositors and gain to stockholders is $337,313.

In so far as the stockholders’ liability is concerned, to contend any of it was paid is ridiculous, offensive to average intelligence, and a subterfuge that outrages equity. The stockholders paid nothing. They merely shifted their money from one their breeches pockets to the other.

The $86,680 paid by the superintendent to or for Bremer was without a substantial shadow of right. The records of Conrad in the superintendent’s possession, to say nothing of his official records, demonstrated Bremer’s claim was mere fiction. And if Bremer’s payment of and subrogation to Cleary’s note and any unpaid balance of Armada’s was any benefit to the depositors, it does not appear in plan or recommendation.

As for Bremer’s Montana stock trusteed for the depositors, long before the date for its contingent application it may be a liability instead of an asset — will be, if Bremer is no more successful with Montana than he was with Conrad. In any event, it is part of the plan to hinder and delay and so to defraud depositors, and avails defendants nothing.

It is no defense to misappropriation of trust funds that the wrongdoer speculates with them, invests them in stock to some time be at the disposal of the beneficiaries.

Likewise, that the superintendent yet has $756,666 “unacceptable assets” that ultimately “might pay all depositors in full.” They are not obligated to stand still until limitations have run, or at all.

In sum, it is transparent the plan by the superintendent imposed upon the court was to benefit stockholders and hinder and delay depositors, was Bremer’s plan, the plan of Conrad stockholders, by Conrad stockholders, for Conrad stockholders.

It compromised nothing but the defendants, settled nothing but the depositors’ hash.

There is nothing to account for it but an irresistible inference of defendants’ collusion to illegally profit by the trust as at least some of them did. Even one of the defendant superintendent’s aids secured a share, an office in Montana.

No estoppel appears. Plaintiffs got nothing but their own money illegally transferred to Montana, and at the only place the superintendent arranged for payment.

As in any trust, the plaintiffs are entitled to accounting if only to he enlightened in respect to questionable transactions by the superintendent, the burden his to disclose and justify.

The motions to dismiss are denied.

The rules allow five days after notice to answer.

In the matter of plaintiffs’ motions to substitute counsel, they are granted.

Be a plaintiff not a representative of the court, as is a receiver, his right to substitute counsel not otherwise interested in the case, at any time, for any or no reason, cannot be denied.

In.class suits the rule is not otherwise. For although plaintiffs’ counsel therein generally is conceded right to control the suit, the court if necessary will guard against any prejudice to interveners and their counsel. And to that end, interveners must be given notice of all proceedings. Indeed, in a class suit the interveners seeking relief the same as plaintiffs are themselves plaintiffs to all intents and purposes.


author: ATWELL, District Judge.

text:
    UNITED STATES v. LIETO et al.
    No. 7926.
    District Court, N. D. Texas, Dallas Division.
    Feb. 16, 1934.
    La Vergne F. Guinn, of Dallas, Tex., and Louis Titus and Quinn Shaugnessy, both of Washington, D. C., for the United States.
    Wm. Madden Hill, Olin M. Street, and T. L. Wheeler, all of Dallas, Tex., for defendant Bob Lieto.
    Howard Dailey, Joe M. Hill, Lee Perkinson, Parker V. Lucas, and Matthaei & Hill, all of Dallas, Tex., for other defendants.
   ATWELL, District Judge.

There are three of these informations. They are numbered, respectively, 7926; 7927, and 7928.

They are based on the National Industrial Recovery Act, 48 Stat. 195, the first section of.which provides that: “A national emergency productive of widespread unemployment and disorganization of industry, which burdens interstate and foreign commerce * * * is hereby declared to exist. It is hereby declared to be the policy of Congress to remove obstructions to the free flow of interstate and foreign commerce which tend to diminish the amount thereof. * * * ” 15 USCA § 701.

Section 2 of the act (15 USCA § 702) empowers administrative agencies to effectuate the policy of the title, to wit, national industrial recovery. To that end the President is authorized to establish such agencies and to accept and utilize such voluntary and uncompensated services, to appoint, without regard to the provisions of the civil service laws, such officers and employees, and to utilize such federal officers and employees, and with the consent of the state, such state and local officers and employees, as he may find necessary; to prescribe their authorities, duties, responsibilities, and tenure, and, without regard to the Classification Act of 1923 (5 USCA § 661 et seq.), as amended, to fix the compensation of any officers and employees so appointed. The President may delegate any of his functions and powers under this title. Then follow provisions for the fixing of codes under which industrial associations and groups must function. Such codes may he voluntarily entered into or may be formulated by the President.

When a code of fair competition has been approved or prescribed by the President under this title, any violation of any provision thereof in any transaction in or affecting interstate or foreign commerce shall be a misdemeanor, and, upon conviction thereof, an offender shall be fined not more than $509 for each offense, but each day such violation continues shall be deemed a separate offense.

A code for the petroleum industry that was approved on August 13, 1933, was somewhat modified on September 13, 1933. It is divided into seven articles. Article 5 has a number of subdivisions which deal with marketing, etc.

Under these provisions, these prosecutions were instituted, by information, which contains four counts. The first count charges that during the week of November 18, 1933, in the city of Dallas, the defendant operated a service station as a merchant and vendor, selling to the public, at retail, petroleum products, to wit, motor fuels, motor lubricants, and motor gasoline; that during that period one Charles Burkley was an employee of the defendant at that station; that the defendant, on the 11th of the said month of the same year, unlawfully, willfully, and knowingly induced and procured the said employee to work for the week ending the 18th more than forty-eight hours, and that such employment and work of the said employee “did then and there affect interstate commerce,” which the defendant then and there well knew, and which was in violation of the National Industrial Recovery Act, and of article 2 of section 3 of the Code of Pair Competition for the Petroleum Industry; that said Code was approved by the President of the United States on August 19, 1933, under and by virtue of an Act of Congress of June 16, 1933, known as the National Industrial Recovery Act; that the employment and work of the said employee did not come within any of the exemptions or exceptions of said act, or of said Code of Pair Competition, nor within any of the exemptions or exceptions of the supplements and modifications of said Pair Competition Code.

The second count charged that the same defendant, within the same venue, and during a week ending November 25th, operating a service station as a merchant and vendor, selling to the public the same products, and that the same employee, under the same inducement and procurement, worked at said service station for a period of more than forty-eight hours during the week ending November 25th; that the work of the said employee affected interstate commerce, and this count contained the same allegations mentioned above as having been contained in the first count.

The third count fixes'the same venue and relates to the same week ending November 18th and to the same business and to the same employee, and charges that the defendant induced and procured the said employee to accept a weekly wage of less than $14.59, which “employment, work and wages of the said Charles R. Burkley did then and there affect interstate commerce,” that the defendant knew this, and that such acts were in violation of the same act of Congress above mentioned and of the same code above mentioned, and also negatives the exceptions.

To the same effect is the fourth count, save and except that that count relates to the wages for the week ending November 2-5th.

The first two counts relate to hours of service and the last two counts to the wages alleged to have been paid.

The defendant filed an appropriate motion asking for a bill of particulars, “as to how and under what circumstances the defendant had then and there affected interstate commerce,” as set out in the information. Responding to this application for more information, the following was furnished, to wit:

1. The acts of the defendants were in violation of paragraph (b) of section 3 of the Act of Congress of June 16, 1933 (15 USCA § 703 (b), known as the National Industrial Recovery Act, and also in violation of paragraph (f) of section 3 of said act (15 USCA § 703 (f), and also in violation of clause 3 of paragraph (a) of section 7 of said act (15 USCA § 707 (a) (3), reading as follows: “That employers shall comply with the maximum hours of labor, minimum rates of pay, and other conditions of employment, approved or prescribed by the President.”

These portions of the act were violated by the defendants’ failure to comply with the maximum hours of labor and the minimum rates of pay prescribed by the. President in the Code of Fair Competition for the Petroleum Industry, approved by the President August 19, 1933.

2. Defendants’ acts in failing to comply ■with the maximum hours of labor prescribed by the President as aforesaid affected interstate commerce, for the reason that causing employees to work longer hours than those prescribed necessarily prevents other unemployed men from regaining employment. The natural consequence of defendants’ act in working men overtime is to cause competitors also to work their employees beyond the maximum hours prescribed by the President, thus still further increasing unemployment, and unemployment, by removing the purchasing power of the unemployed, is a direct burden upon interstate commerce, as is set forth in the preamble of the National Industrial Recovery Act. (Section 1 [15 USCA § 701].) The natural consequences of defendant’s acts in paying less than the prescribed wages is to cause defendants’ competitors to reduce wages to the level set by defendants, thereby reducing the purchasing power of wage-earners and thus affecting interstate commerce, as set forth in the preamble of the National Industrial Recovery Act.

3. That defendants, by working men longer hours than those prescribed by said Code and paying lower wages than those prescribed as aforesaid, are enabled to and have sold petroleum products at lower prices than would have been possible had they complied with the prescribed hours and wages. This compelled competitors, in order to avoid losing their business, to meet the lower prices, and, in order to sell at such lower prices, said competitors were compelled to reduce wages and increase hours, and to reduce the price which they were paying for petroleum products. Increasing hours and reducing wages affects interstate commerce, as set out herein in- paragraph 2. Reducing the price of petroleum products at the refinery compels other refineries to likewise reduce prices, resulting in subnormal prices, whieh in turn compels the closing of refineries not able or not willing to meet such competition, thus taking the products of such closed refineries out of interstate commerce and thereby disrupting the normal flow of petroleum products ih such interstate commerce.

The defendant attacks the information as thus particularized, in the respect indicated, and claims that there is no offense charged. He also moves to quash on the ground that there is no offense alleged, and specifically challenges the act of the Congress, and the code which followed, because the latter is a patent attempt by the executive department of the government to legislate. He also claims that both are in violation of the Fifth Amendment and of the Tenth Amendment and of the Ninth Amendment, and are in excess of the power granted to the Congress in section 8 of article 1 of the Constitution; also, that the entire proceeding is vague, indefinite, and uncertain, and that article 2 of section 3 of the Petroleum Code is wholly unauthorized.

The argument for both sides has resulted in a rearray of the lights that have been fixed from time to time by our highest court with reference to the boundaries of national constitutional power over interstate commerce, over individual contracts and as relating to emergencies.

The seriousness of the question cannot be denied. Oral argument shows that the defendant was conducting a little filling station in Dallas, selling gasoline to be burned in Texas, and made out of oil found and refined in Texas. There is no intimation that his business was other than intrastate, unless the information furnished in the bill of particulars places it within .the interstate category.

It seems to me that the recent Minnesota moratorium decision by the Supreme Court has no direct bearing upon the National Recovery Act. Home Building & Loan Ass’n v. Blaisdell, 290 U. S. 398, 54 S. Ct. 231, 78 L. Ed. 413. Emergencies that may be involved or recognized by a state may be sustained un-. der the general police power inherent in such states. But Congress has no general police power. It must bring its enactments within one of the specifications or implications granted by the national Constitution, otherwise there is a lack of constitutionality.

The national emergency doctrine goes no further than that an emergency may call into' activity a power whieh already exists. It may not speak into life that whieh is dead or never was.

The meatful expressions relating to this particular matter, so far as the national power is concerned, are. bordered by the Lever Act (40 Stat. 276), a war-time measure, for the conservation of coal; the District of Columbia Rent Act (41 Stat. 298), regulating the rent that the landlord could charge; the Northern Securities Case, 193 U. S. 197, 24 S. Ct. 436, 48 L. Ed. 679, and the Adamson Railway Wage Act (39 Stat. 721). Of course, we have the stockyards case (Cotting v. Godard, 183 U. S. 79, 22 S. Ct. 30, 46 L. Ed. 92) and the taxing of trading contracts.

An analysis of all of those cases precludes any thought save and except the exercise by the national government of a constitutional power either for the waging of a war or for the protection of interstate commerce. Both of those powers are directly given in the Constitution.

It has been asserted in argument by distinguished counsel who appear for the prosecution that there is the emergency of unemployment, which' has been declared to exist by the Congress, and which declaration of emergency is binding upon the judicial department of the government; that “employers must be required to put more money into business”; that “the normal flow of interstate commerce must be restored”; that, “unless there is an emergency any attempt to regulate any occurrence must be related to a direct effect upon interstate commerce, but that when an emergency does exist the effect which may be regulated may he an indirect one.”

The rate cases which are known as the Shreveport (Houston, E. & W. T. R. Co. v. U. S., 234 U. S. 342, 34 S. Ct. 833, 58 L. Ed. 1341) and the Wisconsin (Railroad Commission of State of Wisconsin v. Chicago, B. & Q. R. Co., 257 U. S. 563, 42 S. Ct. 232, 66 L. Ed. 371, 22 A. L. R. 1086) cases, as well as Wilson v. New, 243 U. S. 332, 37 S. Ct. 298, 61 L. Ed. 755, L. R. A. 1917E, 938, Ann. Cas. 1918A, 1024, were unmistakably based, without any debate, where no difference of opinion may exist, upon interstate commerce. Railroads passing from state to state are engaged in that. Streams of live stoek passing from the ranges to the markets are en route through many states.

But in the present situation that we are considering there is conceded to be an unemployment emergency. Now the national government has a right to do anything it can, and it is the business of that government to do anything it can to relieve that emergency, provided that which it does is within its power to do. Local business, business confined exclusively to a state, business which does not impinge upon or affect, or disturb interstate commerce, is wholly beyond the fingers of the national government. Such business is amenable to the local government. The fundamental laws of the land preserve and recognize both sorts. The very charter of the national government proclaimed the continuity of the power in the people and of the power in the states. The power that rests and remains with the citizen and with the state is as sovereign and unamenable to attacks from the national government as is the power of the national government sovereign and immune from any act of the state. Each must retain this separateness and this distinctness and this independence in order to preserve the autonomy of the American system. The system is itself of infinite value. Experiments in the governmental field in other countries, as exhibited in history, drove the fathers to the thought, and keep us true to it, that a government such as is ours must have a dual system. That is a national and a state system. Our country is too large, sections are too remote, interests are too diversified, liberties are too numerous and valuable, and the activities of the people are too multiplied to permit a congestion of all power in the national seat.

As was very wisely said in James Everard’s Breweries v. Day et al., 265 U. S. 545, 44 S. Ct. 628, 631, 68 L. Ed. 1174, of the “implied powers,” that attach to express powers:

“The Constitution confers upon. Congress the power to make all laws necessary and proper for carrying into execution all powers that are vested in it. Article 1, § 8, el. 18. In the exercise of such non-enumerated or ‘implied’ powers it has long been settled that Congress is not limited to such measures as are indispensibly necessary to give effect to its express powers, but in the exercise of its discretion as to the means of carrying them into execution, may adopt any means, appearing to it most eligible and appropriate, which are adapted to the end to be accomplished and consistent with the letter and spirit of the Constitution. * * *
“It is likewise well settled that where the means adopted by Congress are not prohibited and are calculated to effect the object intrusted to it, this Court may not inquire into the degree of their necessity; as this would be to pass the line which circumscribes the judicial department and to tread upon legislative ground.”

This expression of the limitless territory of implication, which may not be gainsaid, calls for thoughtful circumspection in discovering the exact, power that is given in the Constitution. And also in the search for such acts as really relate to those powers or things over which the Congress has expressed an implied jurisdiction.

It has been thoughtfully suggested that the newspaper which we read in the morning is the physical product of far-away jurisdictions ; that the food which is eaten on the table of the citizen comes from many climes; that the clothes that give the body its respectability and health, and which preserve it from the rigors of the climate and elements, is not always local in conception. To grant the proposition that one who sells an apple in a stand on a street in the city of Dallas for a less amount than the price fixed hy a code which relates to sale of fruit, because that apple may have been raised in Oregon or in New Mexico, or because the hand that delivers it to the purchaser and receives a nickel therefor is the hand of an humble employee who gets less than a nationally fixed wage, is thereby liable to arrest and prosecution for a violation of a Federal Code under this act, it seems to me, would be stretching the power of the national government beyond apology. What may be said, then, of a criminal law which punishes a Texan for selling that which came out of Texas earth, has never been elsewhere, and is being consumed in Texas ? The voice of the nation’s highest court, sneaking through such eases as Coronado Coal Co. v. United Mine Workers, 268 U. S. 295, 45 S. Ct. 551, 69 L. Ed. 963; Standard Oil Co. v. U. S., 283 U. S. 163, 51 S. Ct. 421, 75 L. Ed. 926; U. S. v. Ferger, 250 U. S. 199, 39 S. Ct. 445, 63 L. Ed. 936; Board of Trade v. Olsen, 262 U. S. 1, 43 S. Ct. 470, 67 L. Ed. 839; U. S. v. L. Cohen Grocery Co., 255 U. S. 81, 41 S. Ct. 298, 65 L. Ed. 516, 14 A. L. R. 1045; Adkins v. Children’s Hospital, 261 U. S. 525, 43 S. Ct. 394, 67 L. Ed. 785, 24 A. L. R. 1238; Wolff Packing Co. v. Industrial Court, 262 U. S. 522, 43 S. Ct. 630, 67 L. Ed. 1103, 27 A. L. R. 1280; Fairmont Creamery Co. v. Minnesota, 274 U. S. 1, 47 S. Ct. 506, 71 L. Ed. 893, 52 A. L. R. 163; Ribnik v. McBride, 277 U. S. 350, 48 S. Ct. 545, 72 L. Ed. 913, 56 A. L. R. 1327; Williams v. Standard Oil Co., 278 U. S. 235, 49 S. Ct. 115, 73 L. Ed. 287, 60 A. L. R. 596; New State Ice Co. v. Liebmann, 285 U. S. 262, 52 S. Ct. 371, 76 L. Ed. 747; Sterling v. Constantin, 287 U. S. 378, 53 S. Ct. 190, 77 L. Ed. 375; Michigan Comn. v. Duke, 266 U. S. 570, 45 S. Ct. 191, 69 L. Ed. 445, 36 A. L. R. 1105; Frost Trucking Co. v. R. R. Comn., 271 U. S. 583, 46 S. Ct. 605, 70 L. Ed. 1101, 47 A. L. R. 457; Smith v. Cahoon, 283 U. S. 553, 51 S. Ct. 582, 75 L. Ed. 1264, even now cautions and points the way.

The mental giant in the fineness of logic may trace a connection between a puff of the breath as an augmenter of the passing wind, or between the light of the burning coal and the primal rays of the sun, but that sort of a fineness in scientific reasoning- may not he carried into the practical execution of the criminal law for the purpose of showing a connection between some one who sells an apple or a suit of clothes or a newspaper or a gallon of gasoline so as to therefrom argue a direct effect upon interstate commerce. See H. Chassaniol v. City of Greenwood, 291 U. S. ---, 54 S. Ct. 541, 78 L. Ed. ---, which upholds a state tax on a buyer of cotton destined to out of state points.

The national government may preserve itself from destruction. That same right exists in the citizen to preserve himself from de- ' struetion. The right of national self-defense is no greater than the right of individual self-defense. But the right of the government to preserve itself from all sorts of attacks, either within or without, must not masquerade in times of peace in some other costume. The power of the national government to carry on the many activities for the relief of the unemployed that are now being carried on in the distribution of moneys and possessions and properties is not in question here. Nor could it be questioned here successfully.

The only controversy that is here is between the humble citizen who asserts his right to carry on his little business in a purely local commodity and in a purely local fashion, without being arrested and punished for a mythical, indirect effect upon interstate commerce. If this were a suit at equity such as have been presented in different jurisdictions, there might he more liberality for the position of the sovereignty. But the fundamentals of individual liberty are safeguarded by certain presumptions, by certain reasonable doubts, by certain requisites as to certainty of allegation and certainty of proof that even a national court, upon the request of the national g-ovemment, cannot, with ease, ignore or destroy.

My opinion is, without multiplying thoughts and reasons, that the regulations and the law sought to be applied under this information and hill of particulars are wholly without authority, and are in violation of the well recognized and established guaranties of the citizen.